SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
LIVE ENTERTAINMENT INC.
(Name of the issuer)
LIVE ENTERTAINMENT INC.
(Name of person filing statement)
Series B Cumulative Convertible Preferred Stock 538032
(Titles of Classes of Securities) __________
(CUSIP Numbers of Classes of Securities)
With a copy to:
Ronald B. Cushey Gary J. Cohen
LIVE Entertainment Inc. Sidley & Austin
15400 Sherman Way 555 W. 5th St.
Van Nuys, California 91406 Los Angeles, California 90013
(818) 988-5060 (213) 896-6000
(Name, address and telephone number of person
authorized to receive notices and communications
on behalf of person filing statement)
_______________, 1996
(Date tender offer first published, sent or given to security holders)
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [X] The filing of a registration statement under
the Securities Act of 1933.
c. [X] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
Calculation of Filing Fee
Transaction valuation(1) Amount of filing fee
$56,055,020 $11,211
(1) Calculated based upon the purchase of outstanding
securities for the liquidation value of the Series B
Preferred Stock and Series C Preferred Stock. The
transaction value is estimated only for the purpose of
calculating the amount of the filing fee.
[ ] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the
offsetting fee was previously paid. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
Amount previously paid: Filing party:
Form or registration no.: Date filed:
Schedule 13E-4 Items
Item 1. Security and Issuer.
(a) Reference is made to the information set forth on
the cover page of the Prospectus and under the caption
"Summary - The Company," which information is incorporated
herein by reference.
(b) Reference is made to the information set forth on
the cover page of the Prospectus and in the Prospectus under
the captions "The Exchange Offer-General," which information
is incorporated herein by reference.
(c) Reference is made to the information set forth in
the Prospectus under the caption "Market Information," which
information is incorporated herein by reference.
(d) Not applicable.
Item 2. Source and Amount of Funds or Other Consideration.
(a) Reference is made to the information set forth in
the Prospectus under the captions "The Exchange
Offer-General," "The Exchange Offer-Background and Purpose of
the Exchange Offer," "The Exchange Offer-Sources of Funds for
Exchange Offer and Equity Rationalization," Description of the
New Notes," "Description of the New LIVE Credit Facility" and
"Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Capital Resources,"
which information is incorporated herein by reference.
(b) Reference is made to the information set forth in
the Prospectus under the captions "The Exchange
Offer-General," "The Exchange Offer-Background and Purpose of
the Exchange Offer," "The Exchange Offer-Sources of Funds for
Exchange Offer and Equity Rationalization,"
Description of the New Notes," "Description of the New LIVE
Credit Facility" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and
Capital Resources," which information is incorporated herein
by reference.
Item 3. Purpose of the Tender Offer and Plans or Proposals
of the Issuer or Affiliate.
(a) Reference is made to the information set forth in
the Prospectus under the captions "Risk Factors," "The
Exchange Offer," "Description of the New Notes," "Beneficial
Ownership of Common Stock and Series C Preferred Stock,"
"Exchange of Series C Preferred Stock by Pioneer" and
"Security Ownership of Certain Beneficial Owners and
Management," which information is incorporated herein by
reference.
(b) Reference is made to the information set forth in
the Prospectus under the captions "Common Stock Proxy
Solicitation," "Action to be Taken Under Proxy - Amendments to
Outstanding Preferred Stock," "The Exchange Offer," and
"Exchange of Series C Preferred Stock by Pioneer," which
information is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
(e) Reference is made to the information set forth in
the Prospectus under the captions "Capitalization," "The
Exchange Offer," "Action to be Taken Under Proxy - Amendments
to Outstanding Preferred Stock," "Description of the New
Notes," "Description of the New LIVE Credit Facility," which
information is incorporated herein by reference.
(f) Reference is made to the information set forth in
the Prospectus under the caption "Risk Factors," "The Exchange
Offer," "Common Stock Proxy Solicitation," "Capitalization,"
"Business," "Executive Officers and Directors of the Company,"
"Certain Relationships and Related Transactions," "Security
Ownership of Certain Beneficial Owners and Management" and
"Description of Capital Stock," which information is
incorporated herein by reference.
(g) Reference is made to the information set forth in
the Prospectus under the captions "Common Stock Proxy
Solicitation," "Proposed Amendments to Outstanding Preferred
Stock," and "Description of Capital Stock," which information
is incorporated herein by reference.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
Item 4. Interest in Securities of the Issuer.
Reference is made to the information set forth in the
Prospectus under the caption "Beneficial Ownership of
Outstanding Preferred Stock," which information is
incorporated herein by reference.
Item 5. Contracts, Arrangements, Understandings or
Relationships with Respect to the Issuer's
Securities.
Reference is made to the information set forth in the
Prospectus under the captions "Risk Factors," "Exchange of
Series C Preferred Stock by Pioneer," "Description of the New
LIVE Credit Facility," "Description of the New Notes,"
"Beneficial Ownership of Outstanding Preferred Stock,"
"Executive Officers and Directors of the Company," "Executive
Compensation and Other Remuneration," "Certain Relationships
and Related Transactions," "Present Intention of Certain
Persons," and "Security Ownership of Certain Beneficial Owners
and Management," which information is incorporated herein by
reference.
Item 6. Persons Retained, Employed or to be Compensated.
Reference is made to the information set forth on the
cover page of the Prospectus and in the Prospectus under the
captions "The Exchange Offer-Payments for Solicitation;
Payment of Expenses," "Opinion of Carreden," and "Opinion of
Special Financial Advisor," which information is incorporated
herein by reference.
Item 7. Financial Information.
(a) Reference is made to the consolidated financial
statements of the Company set forth in the Prospectus, which
information is incorporated herein by reference.
(b) Reference is made to the information set forth in
the Prospectus under the captions "Selected Financial Data"
and "Summary - Pro Forma Financial Data," which information is
incorporated herein by reference.
Item 8. Additional Information.
Reference is made to the information set forth in the
Prospectus on the Cover Pages and under the captions "Risk
Factors," "Common Stock Proxy, Solicitation" and "Action to be
Taken Under Proxy - Amendments to Outstanding Preferred
Stock," which information is incorporated herein by reference.
Item 9. Material to be Filed as Exhibits.
See Exhibit Index filed herewith.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Date: August ___, 1996 LIVE Entertainment Inc.
By: /s/ Ronald Cushey
Name: Ronald B. Cushey
Title: Executive Vice President
<PAGE>
Exhibit Index
to
Schedule 13E-4
Sequential
Exhibit No. Description Of Exhibit Page Number
1. Prospectus, Consent Solicitation, Proxy Statement
2. Letter of Transmittal/Consent Form (included as Annex C to Exhibit 1)
3. Notice of Guaranteed Delivery (included as Annex D to Exhibit 1)
4. Offer to Exchange to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees (included as Annex E-1 to Exhibit 1)
5. Letter to Clients of Nominee Holders (included as Annex E-2 to
Exhibit 1)
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (included as Annex F to Exhibit 1)
7. Notice of Special Meeting of Stockholders (included as Annex F to
Exhibit 1)*
8. Form of Proxy Card (included as Annex H to Exhibit 1)
9. Fairness Opinion of Carreden (included as Annex A to Exhibit 1)*
10. Fairness Opinion of Special Financial Advisor (included as Annex B
to Exhibit 1)*
11. Amended and Restated Certificate of Incorporation of LIVE
Entertainment Inc. (included as Annex I to Exhibit 1)*
12. Amended Certificate of Designations of Series B Preferred Stock
(included as Annex J to Exhibit 1)
13. Engagement letter between the Company and Carreden
* To be provided by amendment
PROSPECTUS, CONSENT SOLICITATION AND
PROXY STATEMENT DATED [_________],
LIVE ENTERTAINMENT INC.
LIVE Entertainment Inc., a Delaware corporation (the
"Company" or "LIVE"), is offering to exchange shares of the
Company's Common Stock, par value $.01 per share (the "Common
Stock"), and cash for all of the Company's outstanding Series B
Cumulative Convertible Preferred Stock, par value $1.00 per share
(the "Outstanding Preferred Stock") and is seeking consents from
the holders ("Holders") of the Outstanding Preferred Stock as
follows:
Exchange Offer: The Company is offering to exchange the Common
Stock Consideration (as hereinafter defined) OR the Cash and
Common Stock Consideration (as hereinafter defined) FOR EACH
share of Outstanding Preferred Stock (the "Exchange Offer"). In
addition;
Preferred Stock Consents: Concurrently with the Exchange Offer,
the Company is soliciting consents from the Holders of the
Outstanding Preferred Stock to certain amendments to its Restated
Certificate of Incorporation governing the Outstanding Preferred
Stock (the "Preferred Stock Consent") (the amendments for which
such consents are sought are known as the "Proposed Amendments,"
and the Exchange Offer and the Preferred Stock Consents are
referred to herein collectively as the "Preferred Stock
Solicitation"). In addition;
Series C Exchange Offer: Concurrently with the Preferred Stock
Solicitation, the Company is also offering to exchange Common
Stock and cash for each share of the Company's outstanding Series
C Convertible Preferred Stock (the "Series C Preferred Stock")
(the "Series C Exchange Offer"). Finally;
Proxy Solicitation: The Company is also soliciting proxies from
the holders of the Company's Common Stock and Series C Preferred
Stock to consent to the Exchange Offer, the Series C Exchange
Offer, to amend the terms of the Company's Restated Certificate
of Incorporation governing the Outstanding Preferred Stock and to
eliminate the Company's Series C Preferred Stock and Series A
Common Stock (collectively the "Common Stock Proxy
Solicitation").
The Preferred Stock Solicitation, Series C Exchange Offer
and Common Stock Proxy Solicitation (collectively the
"Solicitations"), along with the Company's refinancing of both
its existing credit facility with Foothill Capital Corporation
(the "Existing Credit Facility") and its $40 million of
outstanding Increasing Rate Senior Subordinated Notes due 1999
(the "Outstanding Notes"), constitute the key elements in the
Company's 1996 Corporate Equity Rationalization program (the
"Equity Rationalization"). The purpose of the Equity
Rationalization is to allow the Company to remove the uncertainty
from its capital structure which in turn will allow it to finance
its business plan in the future. See "The Exchange Offer-Background
and Purpose of Exchange Offer." The Company believes that the Equity
Rationalization will maximize the value of the Company for all of its
stockholders.
THE EXCHANGE OFFER, THE SERIES C EXCHANGE OFFER, THE PREFERRED STOCK CONSENT
AND THE COMMON STOCK PROXY SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON [ ], 1996, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME UNTIL SUCH
TIME AS THE REQUISITE ACCEPTANCES (AS DEFINED) HAVE BEEN RECEIVED AND THE
AMENDED CERTIFICATE OF INCORPORATION HAS BEEN FILED.
See "Risk Factors" on page __ for a discussion of certain factors
that should be considered in evaluating the Exchange Offer,
Preferred Stock Consent and the Common Stock Proxy Solicitation.
THERE WILL BE A SPECIAL MEETING OF HOLDERS OF COMMON STOCK AND SERIES C
PREFERRED STOCK OF THE COMPANY ON [ ], 1996. ONLY HOLDERS OF RECORD ON
[ ], 1996 WILL BE ENTITLED TO VOTE ON THE MATTERS DESCRIBED UNDER "THE
COMMON STOCK PROXY SOLICITATION."
It is important that the Holders and holders of the
Company's Common Stock and Series C Preferred Stock read and
carefully consider the matters described in this Prospectus,
Consent Solicitation and Proxy Statement (the "Prospectus") and
that such persons respond promptly to the Exchange Offer, the
Preferred Stock Consents, the Series C Exchange Offer and the
Common Stock Proxy Solicitation. For a discussion of certain
important factors that should be considered in connection with
the Equity Rationalization, see "Risk Factors."
The Company intends that the Equity Rationalization will be
implemented through the consensual consummation of the Exchange
Offer and the Proposed Amendments, requiring (i) the acceptance
of the Exchange Offer by, and the receipt of the Preferred Stock
Consents from the Holders of, more than 50% of the shares of
Outstanding Preferred Stock, (ii) the acceptance of the Series C
Exchange Offer from the holder of the Series C Preferred Stock
and (iii) the receipt of proxies in favor of the Common Stock
Proxy Solicitation from the holders of more than 50% of the
shares of the Company's Common Stock and Series C Preferred Stock
considered together as a single class (collectively the
"Requisite Acceptances").
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
COMMON STOCK AND SERIES C PREFERRED STOCK TAKEN TOGETHER AS A
SINGLE CLASS HAVE INDICATED THEIR INTENTION TO VOTE IN FAVOR OF
THE MATTERS TO BE CONSIDERED. THE HOLDER OF THE SERIES C
PREFERRED STOCK HAS INDICATED ITS INTENTION TO ACCEPT THE SERIES
C EXCHANGE OFFER. SEE "COMMON STOCK PROXY SOLICITATION" AND
"PRESENT INTENTION OF CERTAIN PERSONS."
In the event the Company receives the Requisite Acceptances,
the accepting Holders will receive the consideration described
herein and the Holders not accepting will continue to hold
Outstanding Preferred Stock (as amended by the Proposed
Amendments relating thereto, the "Amended Outstanding Preferred
Stock"), as such securities are amended pursuant to the Preferred
Stock Consents.
The Outstanding Preferred Stock is currently listed on the
Nasdaq Small Cap Market (the "Small Cap Market"). The Company
has no intention to request that the Outstanding Preferred Stock
or the Amended Outstanding Preferred Stock be delisted from the
Nasdaq Small Cap Market. If the Nasdaq delists the Amended
Outstanding Preferred Stock, the Company has no intention to seek
a listing for the Outstanding Preferred Stock or the Amended
Outstanding Preferred Stock on any other market or exchange.
Holders of Outstanding Preferred Stock who wish to tender in
the Exchange Offer may do so beginning on [______], 1996 (the
"Commencement Date") and ending on the Expiration Date. HOLDERS
WHO DESIRE TO ACCEPT THE EXCHANGE OFFER MUST CONSENT TO THE
PROPOSED AMENDMENTS. The applicable record date (the "Record
Date") for purposes of determining which Holders of Outstanding
Preferred Stock are eligible to tender in the Exchange Offer and
grant the Preferred Stock Consents is [______], 1996 for the
Outstanding Preferred Stock. The term "Record Holder" with
respect to a vote on the Preferred Stock Consents means any
person in whose name shares of Outstanding Preferred Stock are
held on the applicable Record Date. Holders who purchase
Outstanding Preferred Stock after the applicable Record Date who
wish to tender in the Exchange Offer and grant the Preferred
Stock Consents must arrange with the seller of such Outstanding
Preferred Stock to receive a valid proxy from the Record Holder.
The Company reserves the right to amend, modify or
supplement the Exchange Offer, the Preferred Stock Consents and
the Series C Exchange Offer prior to their effectiveness. The
Company also reserves the right to cancel the Solicitations at
any time prior to the Expiration Date. The Company will give the
Record Holders notice of any amendments, modifications or
supplements as may be required by applicable law. See "The
Exchange Offer-General" and "The Exchange Offer-Expiration;
Extension." Holders of Outstanding Preferred Stock, Series C
Preferred Stock and Common Stock have no appraisal rights in
connection with the Solicitations, and all holders of Outstanding
Preferred Stock will be bound by the Proposed Amendments if the
Equity Rationalization is successfully completed, regardless of
whether they consented thereto.
At a special meeting of the holders of Common Stock and
Series C Preferred Stock of the Company, such holders will be
asked to consider and act upon amendments to the Restated
Certificate of Incorporation of the Company to effect the
following:
(i) consummate the Exchange Offer and the Series C Exchange
Offer; and
(ii) amend the terms of the Outstanding Preferred Stock in
accordance with the Proposed Amendments; and
(iii) eliminate the Company's 15,000,000 shares of
Series A Common Stock and increase the number of
shares of Common Stock by a like amount and
eliminate the Company's Series C Preferred Stock.
THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF COMMON STOCK AND SERIES C PREFERRED STOCK VOTING
TOGETHER AS A SINGLE CLASS OF THE MATTERS SET FORTH ABOVE IS
REQUIRED FOR THE CONSUMMATION OF THE EXCHANGE OFFER. THE FAILURE
OF THE COMPANY TO OBTAIN THE COMMON STOCK PROXIES WOULD CAUSE THE
COMPANY TO SEEK ALTERNATIVES OTHER THAN THE EQUITY
RATIONALIZATION.
HOWEVER, THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON
STOCK AND SERIES C PREFERRED STOCK ENTITLED TO VOTE HAVE INFORMED
THE COMPANY THAT THEY INTEND TO VOTE IN FAVOR OF THE MATTERS SET
FORTH ABOVE. ACCORDINGLY, THE APPROVAL OF THE MATTERS SUBMITTED
TO A VOTE OF THE HOLDERS OF COMMON STOCK AND SERIES C PREFERRED
STOCK IS ANTICIPATED. SEE "PRESENT INTENTION OF CERTAIN
PERSONS."
For additional information regarding the Common Stock Proxy
Solicitation and the matters to be considered at the special
meeting, see "Common Stock Proxy Solicitation."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
MERITS OF THE EQUITY RATIONALIZATION OR THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE SOLICITATIONS
OTHER THAN THOSE CONTAINED HEREIN. IF GIVEN OR MADE, ANY SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY.
HOLDERS OF SECURITIES OF THE COMPANY SHOULD READ AND
CONSIDER THIS PROSPECTUS CAREFULLY, INCLUDING, WITHOUT
LIMITATION, ALL OF THE FACTORS SET FORTH UNDER THE HEADING "RISK
FACTORS."
All Holders of Outstanding Preferred Stock and holders of
Series C Preferred Stock and Common Stock should read and
carefully consider this Prospectus prior to responding to the
Solicitations and the other matters addressed herein. Holders of
Outstanding Preferred Stock and holders of Series C Preferred
Stock and Common Stock should not construe the contents of this
Prospectus as providing any legal, business, financial or tax
advice. Each such holder should, therefore, consult with its own
legal, business, financial and tax advisors as to any matters
concerning the Exchange Offer, the Preferred Stock Consent, the
Series C Exchange Offer, the Common Stock Proxy Solicitation and
the transactions contemplated hereby or thereby.
THE BOARD OF DIRECTORS OF THE COMPANY HAS VOTED TO APPROVE
THE EQUITY RATIONALIZATION AND HAS DETERMINED THAT THE EXCHANGE
OFFER, THE SERIES C EXCHANGE OFFER AND EQUITY RATIONALIZATION ARE
FAIR TO THE UNAFFILIATED HOLDERS OF THE COMPANY'S SECURITIES,
INCLUDING HOLDERS OF THE OUTSTANDING PREFERRED STOCK, AND
RECOMMENDS THAT HOLDERS OF THE OUTSTANDING PREFERRED STOCK ACCEPT
THE EXCHANGE OFFER AND GRANT THE PREFERRED STOCK CONSENTS, AND
THAT HOLDERS OF COMMON STOCK AND SERIES C PREFERRED STOCK OF THE
COMPANY VOTE "FOR" THE MATTERS SUBMITTED FOR THEIR APPROVAL.
This Prospectus is first being sent to the holders of the
Outstanding Preferred Stock, Common Stock and Series C Preferred
Stock on [______], 1996.
The Preferred Stock Solicitation is not being made to, nor will
the Company accept consents or tenders from, Holders in any jurisdiction
in which the Preferred Stock Solicitation would not be in compliance with
the securities or blue sky laws of such jurisdiction. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to
purchase any securities to any person in any jurisdiction in
which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company and its
subsidiaries since the respective dates as of which information
is given herein.
EXCHANGE AGENT AND INFORMATION AGENT
American Stock Transfer & Trust Company will act as Exchange
Agent for the Exchange Offer. All correspondence in connection
with the Exchange Offer and Letters of Transmittal/Consent Form
(the "Letters of Transmittal") should be addressed to the
Exchange Agent as set forth on the back cover page hereof.
The Carreden Group Incorporated has been appointed as
Information Agent for the Solicitations. All inquiries relating
to the Solicitations should be directed to the Information Agent
at the address and telephone number set forth on the back cover
page hereof.
AVAILABLE INFORMATION
The Company distributes to the Holders of Outstanding
Preferred Stock annual reports to stockholders and each quarterly
or other financial report, if any, furnished by it generally to
stockholders. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company may be
inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Chicago, Illinois
60661 and at 75 Park Place, New York, New York 10007. Copies of
such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the fees prescribed by the
Commission. The Commission also maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding
registrants that file electronically with the Commission.
A Registration Statement on Form S-4, including any
amendments thereto (the "Registration Statement"), relating to
the securities offered hereby has been filed by the Company with
the Commission. This Prospectus does not contain all of the
information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with
respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and such exhibits
and schedules. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to
the copy of such contract or the document filed or incorporated
by reference as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference.
A copy of the Registration Statement may be inspected without
charge at the Commission's principal offices in Washington, D.C.,
and copies of all or any part thereof may be obtained from the
Commission upon the payment of certain fees prescribed by the
Commission. The Commission also maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding
registrants that file electronically with the Commission.
Pursuant to Rule 13e-4 of the General Rules and Regulations
under the Exchange Act, the Company has filed with the Commission
a Schedule 13E-4, together with exhibits furnishing certain
additional information with respect to the Exchange Offer. This
Schedule will be available for copying and inspection as
described above (except they will not be available at the
Regional Offices of the Commission).
Copies of the provisions of the Restated Certificate of
Incorporation of the Company relating to the Outstanding
Preferred Stock and the Amended Outstanding Preferred Stock are
available to holders of Outstanding Preferred Stock and Common
Stock of the Company upon written request from LIVE Entertainment
Inc., 15400 Sherman Way, Suite 500, Van Nuys, California 91406,
Attention: Ronald B. Cushey.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission pursuant to the Exchange Act, under File No. 0-17342
are incorporated in this Prospectus by reference and made a part
hereof: (i) Proxy Statement on Schedule 14A filed with the
Commission on ___ (the "Proxy Statement"); (ii) the portions of
the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1995 that have been incorporated by reference
into the Proxy Statement.
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the
Exchange Offer described herein shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement
contained in a document incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which is also incorporated
or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person,
including any beneficial owner, to whom this Prospectus is
delivered, upon oral or written request, a copy of any and all
documents incorporated herein by reference (other than exhibits
to such documents, unless such exhibits are specifically
incorporated by reference in such documents. Written or
telephone requests should be directed to LIVE Entertainment Inc.,
15400 Sherman Way, Suite 500, Van Nuys, California 91406,
Attention: Ronald B. Cushey; Telephone 818/988-5060.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . -12-
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . -16-
General. . . . . . . . . . . . . . . . . . . . . . . . . -16-
Background and Purpose of the Exchange Offer . . . . . . -17-
Recommendation of the Board of Directors of the Company. -19-
Opinion of Carreden. . . . . . . . . . . . . . . . . . . -19-
Opinion of the Special Financial Advisor . . . . . . . . -20-
Effects of Consummation of Exchange Offer on
Non-Tendering Holders of Outstanding Preferred Stock . . -20-
Expiration; Extension. . . . . . . . . . . . . . . . . . -21-
Proposed Amendments. . . . . . . . . . . . . . . . . . . -21-
Dividends on Outstanding Preferred Stock . . . . . . . . -22-
Conditions of the Exchange Offer . . . . . . . . . . . . -22-
Sources of Funds for Exchange Offer and Equity
Rationalization . . . . . . . . . . . . . . . . . . -23-
Payments for Solicitations; Payment of Expenses. . . . . -24-
PROPOSED AMENDMENTS TO OUTSTANDING PREFERRED STOCK . . . . . -24-
COMMON STOCK PROXY SOLICITATION. . . . . . . . . . . . . . . -25-
ACTION TO BE TAKEN UNDER PROXY . . . . . . . . . . . . . . . -26-
Approval of the Exchange Offer, Series C Exchange Offer
and Issuance of Additional Common Stock . . . . . . -27-
Amendments to Outstanding Preferred Stock. . . . . . . . -27-
Elimination of Series A Common Stock and Series C
Preferred Stock . . . . . . . . . . . . . . . . . . -27-
Other Matters. . . . . . . . . . . . . . . . . . . . . . -28-
PRESENT INTENTION OF CERTAIN PERSONS . . . . . . . . . . . . -28-
EXCHANGE OF SERIES C PREFERRED STOCK BY PIONEER. . . . . . . -28-
DESCRIPTION OF THE NEW NOTES . . . . . . . . . . . . . . . . -29-
DESCRIPTION OF THE NEW LIVE CREDIT FACILITY. . . . . . . . . -29-
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . -29-
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . -29-
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . -31-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . -34-
Results of Operations. . . . . . . . . . . . . . . . . . -34-
Liquidity and Capital Resources. . . . . . . . . . . . . -37-
Impact of Inflation and Other Matters. . . . . . . . . . -39-
LIVE ENTERTAINMENT
1996 - 1998 FINANCIAL FORECASTS. . . . . . . . . . . . . . . -39-
General Assumptions. . . . . . . . . . . . . . . . . . . -39-
Revenues and Costs of Sales. . . . . . . . . . . . . . . -39-
Operating Expenses . . . . . . . . . . . . . . . . . . . -40-
Income Taxes . . . . . . . . . . . . . . . . . . . . . . -40-
Film Right Payments. . . . . . . . . . . . . . . . . . . -40-
Distribution . . . . . . . . . . . . . . . . . . . . . . -40-
Cash Receipts. . . . . . . . . . . . . . . . . . . . . . -40-
Cash Disbursements . . . . . . . . . . . . . . . . . . . -41-
Financial Forecasts. . . . . . . . . . . . . . . . . . . -42-
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Recent Developments for the Company. . . . . . . . . . . -42-
Entertainment Production, Marketing and Distribution
Operations. . . . . . . . . . . . . . . . . . . . . -44-
Acquisition of Motion Picture Distribution Rights by
the Company . . . . . . . . . . . . . . . . . . . . -49-
Competition. . . . . . . . . . . . . . . . . . . . . . . -52-
Regulation Affecting the Company . . . . . . . . . . . . -52-
Major Customers. . . . . . . . . . . . . . . . . . . . . -52-
Employees. . . . . . . . . . . . . . . . . . . . . . . . -52-
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY. . . . . . . -53-
Executive Committee. . . . . . . . . . . . . . . . . . . -55-
Compensation Committee . . . . . . . . . . . . . . . . . -56-
Stock Option Committee . . . . . . . . . . . . . . . . . -56-
Independent Committee. . . . . . . . . . . . . . . . . . -56-
Audit Committee. . . . . . . . . . . . . . . . . . . . . -56-
Steering Committee . . . . . . . . . . . . . . . . . . . -56-
Arrangements Pursuant to Which Certain Directors Have
Been Elected. . . . . . . . . . . . . . . . . . . . -56-
Board Fees . . . . . . . . . . . . . . . . . . . . . . . -56-
Compensation Committee Interlocks and Insider
Participation . . . . . . . . . . . . . . . . . . . -57-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . -59-
BENEFICIAL OWNERSHIP OF COMMON STOCK AND SERIES C PREFERRED
STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . -61-
BENEFICIAL OWNERSHIP OF OUTSTANDING PREFERRED STOCK. . . . . -64-
MARKET INFORMATION . . . . . . . . . . . . . . . . . . . . . -64-
Common Stock . . . . . . . . . . . . . . . . . . . . . . -64-
Outstanding Preferred Stock. . . . . . . . . . . . . . . -65-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . -66-
Employment and Consulting Agreements . . . . . . . . . . -66-
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . -68-
Federal Income Tax Consequences to Holders of
Outstanding Preferred Stock . . . . . . . . . . . . -68-
Federal Income Tax Consequences to Holders of Common
Stock . . . . . . . . . . . . . . . . . . . . . . . -69-
Federal Income Tax Consequences to Company . . . . . . . -69-
Backup Withholding and Reporting . . . . . . . . . . . . -69-
PROCEDURE FOR TENDERING OUTSTANDING PREFERRED STOCK AND
GIVING PREFERRED STOCK CONSENTS. . . . . . . . . . . . . . . -70-
Guaranteed Delivery Procedures . . . . . . . . . . . . . -72-
Acceptance of Outstanding Preferred Stock and Payment. . -73-
Withdrawal Rights. . . . . . . . . . . . . . . . . . . . -73-
Revocation of Consents; Defective Tenders. . . . . . . . -74-
Exchange Agent . . . . . . . . . . . . . . . . . . . . . -74-
Information Agent. . . . . . . . . . . . . . . . . . . . -75-
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . -75-
General. . . . . . . . . . . . . . . . . . . . . . . . . -75-
Common Stock . . . . . . . . . . . . . . . . . . . . . . -76-
Series R Preferred Stock . . . . . . . . . . . . . . . . -76-
Series C Preferred Stock . . . . . . . . . . . . . . . . -79-
Outstanding Preferred Stock. . . . . . . . . . . . . . . -81-
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . -86-
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . -86-
Index to Financial Statements. . . . . . . . . . . . . . . . F-1
Annex A: Fairness Opinion of Carreden . . . . . . . . . .
Annex B: Fairness Opinion of Special Financial Advisor . .
Annex C: Letter of Transmittal/Consent Form . . . . . . .
Annex D: Notice of Guaranteed Delivery . . . . . . . . . .
Annex E-1: Offer to Exchange to Securities Dealers,
Commercial Banks, Trust Companies, and Other
Nominees . . . . . . . . . . . . . . . . . . . .
Annex E-2: Offer to Exchange to Our Clients . . . . . . . .
Annex F: Guidelines to Certification of Taxpayer
Identification Number on Substitute Form W-9 . .
Annex G: Notice of Special Meeting of Stockholders . . . .
Annex H: Proxy Card. . . . . . . . . . . . . . . . . . . .
Annex I: Amended and Restated Certificate of
Incorporation of LIVE Entertainment Inc. . . . .
Annex J: Amended Certificate of Designations of
Series B Preferred Stock . . . . . . . . . . . .
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the
detailed information and financial statements and notes thereto
appearing elsewhere in this document.
THE COMPANY
LIVE Entertainment Inc., a Delaware corporation (the
"Company" or "LIVE") was formed in 1988. Its largest ongoing
businesses are LIVE Film and Mediaworks Inc. (formerly LIVE Home
Video Inc.) ("LFM") and its division LIVE International ("LI"),
which primarily acquire rights to produce and distribute
theatrical motion pictures, children's films and special interest
programs which they market and distribute in all media to
wholesalers, retailers and consumers in the United States and
internationally. The Company's operations are primarily in a
single business segment, the worldwide distribution and sale of a
broad variety of film related entertainment software products.
The Company's executive offices are located at 15400 Sherman
Way, Suite 500, Van Nuys, California 91406 and its telephone
number is (818) 988-5060.
THE EQUITY RATIONALIZATION
The Equity Rationalization culminates a series of events
which began in 1993 when management of the Company successfully
guided the Company through a prepackaged Chapter 11
reorganization which converted senior subordinated debt into $40
million of Outstanding Notes and $60 million in liquidation value
of Outstanding Preferred Stock. Since the Company's successful
reorganization, the Company has purchased in open market
transactions and retired approximately 2,177,500 shares of the
Outstanding Preferred Stock at an average price per share of
approximately $4.27.
In March 1996, the Company retained The Carreden Group
Incorporated ("Carreden") to act as its exclusive financial
advisor in connection with a rationalization of the Company's
current capitalization. The Company's management and its
advisors believe that the Exchange Offer for the Outstanding
Preferred Stock is necessary for the Company to arrange for the
refinancing of the Outstanding Notes and for consummation of the
New LIVE Credit Facility (as hereinafter defined), which will in
turn provide the Company with sufficient capital to execute its
business plan.
Consummation of the Equity Rationalization will result in
the elimination of the future dilutive impact of the Outstanding
Preferred Stock and the extension of the due date on the
Company's subordinated debt, will bring stability to the
Company's capital structure, and will allow management to focus
on the Company's core businesses rather than on the Company's
liquidity needs.
The Preferred Stock Solicitation is being made by the
Company to the Holders of the Company's Outstanding Preferred
Stock. The Company is offering the Common Stock Consideration or
the Cash and Common Stock Consideration for all 3,819,802 issued
and outstanding shares of Outstanding Preferred Stock (with a
liquidation preference of $38,198,020) plus accrued dividends.
The Company is also seeking the consent of the Holders to certain
amendments to the Outstanding Preferred Stock, which amendments
may substantially reduce the value thereof for those Holders who
do not accept the Exchange Offer and therefore choose to retain
shares of Amended Outstanding Preferred Stock.
Concurrently with the Preferred Stock Solicitation, the
Company is offering to exchange shares of Common Stock and cash
for all of the Company's Series C Preferred Stock. In addition,
the Company is seeking approval from the holders of its Common
Stock and Series C Preferred Stock to certain amendments to its
Restated Certificate of Incorporation necessary for the
consummation of the Preferred Stock Solicitation.
Finally, in connection with the Equity Rationalization, the
Company intends to refinance its $40 million of Outstanding Notes
by issuing $50 million of New Subordinated Notes (the "New
Notes") and to replace the $30 million Existing Credit Facility
with a new credit facility in the principal amount of
approximately $50 million (the "New LIVE Credit Facility").
Issuance of the New Notes and availability of funds under the New
LIVE Credit Facility are conditioned upon the success of the
Exchange Offer and Solicitations.
The Board of Directors of the Company has approved the
Solicitations and has determined that they are fair to the
unaffiliated holders of the Company's securities. The Board
recommends that Holders accept the Exchange Offer and grant the
Preferred Consents, and that the holders of the Company's Common
Stock and Series C Preferred Stock, voting together as a single
class, vote in favor of the amendments to the Company's Restated
Certificate of Incorporation necessary to consummate the
Solicitations.
PREFERRED STOCK SOLICITATION
The Exchange Offer
The Company is offering to exchange the Common Stock
Consideration OR the Cash and Common Stock Consideration FOR EACH
share of Outstanding Preferred Stock.
The Common Stock Consideration. The Common Stock Consideration
for each share of Outstanding Preferred Stock is equal to that
number of shares of the Company's Common Stock equal to [STOCK%]
times the liquidation value of a share of Outstanding Preferred
Stock ($10.00 per share) divided by the Market Price, as defined
below. The Market Price of the Company's Common Stock will be
determined based upon a formula to be announced prior to the
commencement of the Solicitations, but in no event less than [$
MIN PRICE] ("Market Price").
The Cash and Common Stock Consideration. The Cash and Common
Stock Consideration for each share of Outstanding Preferred Stock
is equal to [CASH%] times the liquidation value of a share of
Outstanding Preferred Stock ($10.00 per share) in total value
comprised of a Cash Portion and the remainder in Common Stock
valued at the Market Price. The Cash Portion available for each
share of Outstanding Preferred Stock which elects to receive the
Cash and Common Stock Consideration will equal [$ CASH AVAILABLE]
divided by the number of shares of Outstanding Preferred Stock
which elect to receive the Cash and Common Stock Consideration,
but the Cash Portion may be no more than [$ MAX PRICE] nor less
than [$ MIN PRICE] per share of Outstanding Preferred Stock. If
every Holder of Outstanding Preferred Stock elects to participate
in the Exchange Offer and to receive the Cash and Common Stock
Consideration, the Holders of Outstanding Preferred Stock will
receive [$ MIN PRICE] per share of such Outstanding Preferred
Stock in cash and the remainder in Company Common Stock valued at
the Market Price. If Holders of no more than ___% of the of
Outstanding Preferred Stock elect to receive the Cash and Common
Stock Consideration, such Holders will receive a Cash Portion
equal to [$ MAX PRICE] per share of such Outstanding Preferred
Stock and the remainder in Common Stock valued at the Market
Price.
The Preferred Stock Consents
The Company is soliciting consents from Holders of the
Outstanding Preferred Stock to certain amendments to its Restated
Certificate of Incorporation governing the Outstanding Preferred
Stock. Holders of Outstanding Preferred Stock who desire to
tender Outstanding Preferred Stock in the Exchange Offer must
consent to the Proposed Amendments.
For the Proposed Amendments to become effective with respect
to the Outstanding Preferred Stock, Holders of record of more
than 50% of the aggregate number of shares of Outstanding
Preferred Stock must grant a Preferred Stock Consent with respect
thereto and such valid and unrevoked Preferred Stock Consent must
have been delivered to the Exchange Agent. Subject to the
conditions to the consummation of the Exchange Offer set forth in
this Prospectus, including that the Company being satisfied that
it has received the Requisite Acceptances to the Proposed
Amendments, the Exchange Agent will deliver such consents to the
appropriate persons as promptly as possible after the receipt
thereof, and the Certificate of Amendment to Restated Certificate
of Incorporation will be executed and filed with the Secretary of
State of the State of Delaware and will become effective
immediately thereafter.
Effects of Exchange Offer on Non-Tendering Holders of Outstanding
Preferred Stock
If the Equity Rationalization is consummated, the Holders of
Outstanding Preferred Stock who do not accept the Exchange Offer
will lose the benefit of numerous provisions of the Outstanding
Preferred Stock. The Proposed Amendments to the Outstanding
Preferred Stock will eliminate most rights of Holders thereof to
vote, any right to convert on the current terms and all rights to
dividend payments (including dividends in arrears). In addition,
because the number of Holders of Outstanding Preferred Stock
after the consummation of the Equity Rationalization is expected
to be extremely limited, it is unlikely that there will be any
significant active trading in the Amended Outstanding Preferred
Stock. The Amended Outstanding Preferred Stock may cease to be
listed on the Nasdaq Small Cap Market and may cease to be
registered under the Exchange Act, although the Company has no
present intention to cause either to occur at this time. (The
Outstanding Preferred Stock is presently held by so few record
holders that it may be deregistered by the Company under the
Exchange Act at any time.) These events are likely to have a
materially adverse effect on the value of the Amended Outstanding
Preferred Stock following consummation of the Equity
Rationalization.
Expiration; Extension; Withdrawal Rights
The Exchange Offer will expire at 5:00 p.m., New York City
time on [______], [______], 1996, or at any later time and date
to which such Exchange Offer may from time to time be extended by
the Company (the "Expiration Date"). The Company expressly
reserves the right, at any time or from time to time, to extend
the period of time for which the Exchange Offer is to remain
open.
Tenders of Outstanding Preferred Stock are irrevocable,
except that tendered Outstanding Preferred Stock may be withdrawn
(a) at any time prior to 5:00 p.m., New York City time, on
[______], [______], 1996 and (b) if applicable, for a period of
five business days following public announcement of a waiver of
the Requisite Acceptance condition in respect of the Exchange
Offer or certain other conditions described herein. Tendered
Outstanding Preferred Stock may also be withdrawn at any time
after forty business days after the Commencement Date of the
Exchange Offer, if the Exchange Offer has not been consummated by
this date.
Conditions of the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer,
the Company will not be required to accept any Outstanding
Preferred Stock tendered for exchange and may terminate or amend
the Exchange Offer as provided herein if any of the following
conditions shall not be satisfied:
(a) more than 50% of the aggregate number of issued
and outstanding shares of Outstanding Preferred Stock shall
have been validly tendered and not withdrawn pursuant to the
Exchange Offer prior to the Expiration Date and the Holders
thereof shall have given and not revoked their Preferred
Stock Consents to the Proposed Amendments;
(b) prior to the Expiration Date, the holders of at
least a majority of the Common Stock and the Series C
Preferred Stock, voting together as a single class, shall
have approved the Exchange Offer and the amendments to the
Restated Certificate of Incorporation of the Company;
(c) on the Expiration Date, the holder of the Series C
Preferred Stock shall have accepted the Series C Exchange
Offer;
(d) on or prior to the Expiration Date, the Company
and the purchasers of the New Notes shall have executed and
delivered the New Notes and all conditions to the
effectiveness thereof, other than the consummation of the
Exchange Offer, the Series C Exchange Offer, and the
retirement of the Outstanding Notes, shall have been
satisfied or waived;
(e) on or prior to the Expiration Date, the Company
and the lenders under the New LIVE Credit Facility shall
have executed and delivered the New LIVE Credit Facility and
all conditions to the effectiveness thereof, other than the
consummation of the Exchange Offer, the Series C Exchange
Offer, and the retirement of the Existing Credit Facility,
shall have been satisfied or waived;
(f) there shall not have been instituted before any
court or governmental agency, authority or body or any
arbitrator any action or proceeding (i) challenging the
acquisition of Outstanding Preferred Stock or the payment of
cash and issuance of Common Stock in exchange therefor
pursuant to the Exchange Offer, or (ii) in the sole judgment
of the Company, otherwise materially adversely affecting the
transactions contemplated by the Exchange Offer or the
contemplated benefits of the Exchange Offer to the Company;
(g) there shall not have been proposed or enacted any
statute or other legislation, rule or regulation, and no
action shall have been taken by any governmental authority,
which would or might, in the sole judgment of the Company,
prohibit, restrict or delay consummation of the Exchange
Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company;
(h) there shall not exist, in the sole judgment of the
Company, any other actual or threatened legal impediment to
the acquisition by the Company of Outstanding Preferred
Stock or to the issuance of the Common Stock or payment of
cash in exchange therefor pursuant to the Exchange Offer or
any other circumstances that would materially adversely
affect the transactions contemplated by the Exchange Offer
or the contemplated benefits of the Exchange Offer to the
Company;
(i) there shall not have occurred, in the sole
judgment of the Company, (i) any general suspension of
trading in, or limitation on prices for, securities listed
on the Nasdaq or New York Stock Exchange; or (ii) a
declaration of a banking moratorium or any suspension of
payments in respect of the banks in the United States
(whether or not mandatory); or (iii) a commencement of a
war, armed hostilities or other international or national
emergency directly or indirectly involving the United
States; or (iv) any significant change in the United States
or any other currency exchange rates or a suspension of, or
limitation on, the markets therefor (whether or not
mandatory); or (v) any limitation (whether or not mandatory)
by any governmental authority on, or any other event having
reasonable likelihood of affecting, the extension of credit
by banks or other lending institutions in the United States;
or (vi) in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, in the sole
judgment of the Company, a material acceleration or
worsening thereof;
(j) the Amended Outstanding Preferred Stock and Common
Stock to be issued as a result of the Exchange Offer and the
Series C Exchange Offer shall have been registered under the
Securities Act and there shall not be issued and in effect a
stop order issued by the Commission with respect to the
registration and issuance of the foregoing; and
(k) there shall not have occurred or be likely to
occur an event affecting the business or financial affairs
of the Company and its subsidiaries or the Exchange Offer
which, in the sole judgment of the Company, would or might
prohibit, restrict or delay the consummation of the Exchange
Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company or otherwise result in
consummation of the Exchange Offer not being in the best
interests of the Company.
If any of the foregoing conditions shall not be satisfied,
the Company may (i) terminate the Exchange Offer and return all
Outstanding Preferred Stock tendered pursuant to such terminated
Exchange Offer to exchanging Holders, (ii) extend the Exchange
Offer and retain all tendered Outstanding Preferred Stock until
the final Expiration Date for the extended Exchange Offer or
(iii) waive the unsatisfied conditions with respect to the
Exchange Offer (provided that the Company will not waive the
conditions referred to in paragraphs (a) through (e) above with
respect to the Exchange Offer without making a public
announcement thereof and permitting the withdrawal of Outstanding
Preferred Stock tendered pursuant to the Exchange Offer for a
period of five business days following such public announcement)
and accept all Outstanding Preferred Stock tendered pursuant to
the Exchange Offer.
All the foregoing conditions are for the sole benefit of the
Company and may be asserted by the Company regardless of the
circumstances giving rise to such condition and may be waived by
the Company (other than as stated in the preceding paragraph), in
whole or in part, at any time and from time to time, in the sole
discretion of the Company. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to
time.
Procedures for Tendering Outstanding Preferred Stock and Giving
Preferred Stock Consents
For a Holder validly to tender Outstanding Preferred Stock
pursuant to the Exchange Offer, the Holder must either (i)
deliver the Outstanding Preferred Stock, together with a properly
completed and duly executed Letter of Transmittal/Consent Form (a
"Letter of Transmittal") or facsimile thereof and any other
documents required by the Letter of Transmittal, to the Exchange
Agent on or prior to the Expiration Date, or (ii) comply with the
required guaranteed delivery procedures. A Holder who wishes to
tender a portion of his Outstanding Preferred Stock for the
Common Stock Consideration and a portion for the Cash and Common
Stock Consideration must complete a separate Letter of
Transmittal in respect of each such tender.
All signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by an Eligible
Institution (as hereinafter defined) unless the Outstanding
Preferred Stock tendered pursuant thereto is tendered (i) by a
Holder of record on the applicable Record Date ("Record Holder")
of the Outstanding Preferred Stock who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the relevant Letter of Transmittal or (ii) for
the account of an Eligible Institution. If Outstanding Preferred
Stock is registered in the name of a person other than the signer
of a Letter of Transmittal or a notice of withdrawal, as the case
may be, then the Outstanding Preferred Stock must be endorsed by
the Record Holder, or be accompanied by a written instrument or
instruments of transfer or exchange in form satisfactory to the
Company duly executed by the Record Holder, and in the case of a
Letter of Transmittal must also be accompanied by a properly
completed form of consent from such Holder with respect to the
Proposed Amendments (unless this requirement is waived by the
Company) and with signature guaranteed by an Eligible
Institution.
Holders of Outstanding Preferred Stock who are not Record
Holders of, and who seek to tender, Outstanding Preferred Stock
should (i) obtain a properly completed Letter of Transmittal from
the Record Holder with signatures guaranteed by an Eligible
Institution, or (ii) obtain and include with the relevant Letter
of Transmittal Outstanding Preferred Stock properly endorsed for
transfer by the registered holder or accompanied by a properly
completed stock power from the Record Holder, together with a
properly completed form of consent from such Record Holder with
respect to the Proposed Amendments, with signatures on the
endorsement or power and on the consent guaranteed by an Eligible
Institution, or (iii) effect a record transfer of such
Outstanding Preferred Stock and comply with the requirements
applicable to Record Holders for tendering Outstanding Preferred
Stock prior to the Expiration Date. Any Outstanding Preferred
Stock properly tendered prior to the Expiration Date accompanied
by a properly completed Letter of Transmittal will be transferred
of record by the transfer agent either prior to or as of the
Expiration Date at the discretion of the Company. The Company
has no obligation to transfer any Outstanding Preferred Stock
from the name of the Record Holder thereof if the Company does
not accept for exchange any of such Outstanding Preferred Stock.
Holders who do not tender their Outstanding Preferred Stock
and who wish to grant a Preferred Stock Consent to the Proposed
Amendments should complete a Letter of Transmittal (which will
serve as the form of Preferred Stock Consent) in accordance with
the instructions thereto and return it promptly to the Exchange
Agent, who will transmit it to the Company. The Company will not
accept for exchange any Outstanding Preferred Stock if the Holder
thereof has not granted the Preferred Stock Consent relating
thereto.
Each tendering Holder must complete the Substitute Form W-9
provided in the relevant Letter of Transmittal and provide tax
related information to the Company.
All questions as to the form of all documents and the
validity (including time of receipt), eligibility, acceptance and
withdrawal of tendered Outstanding Preferred Stock will be
determined by the Company, in its sole discretion, which
determination shall be final and binding. The Company reserves
the absolute right to reject any and all tenders not in proper
form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful.
Accrued Dividends on the Amended Outstanding Preferred Stock
Upon effectiveness of the Proposed Amendments, all Holders
of Amended Outstanding Preferred Stock will cease to have any
right to the payment of dividends, including dividends in
arrears.
Risk Factors
Set forth under the heading "Risk Factors" is a discussion
of certain matters which the Holders and holders of Series C
Preferred Stock and Common Stock should carefully consider prior
to determining whether to vote in favor or against the matters
submitted for their approval or to accept or reject the Exchange
Offer, including a discussion of factors relating to the purpose
of the Exchange Offer, the fairness of the Exchange Offer and the
effect of the Exchange Offer on the Holders.
Federal Income Tax Consequences
The consummation of the Equity Rationalization could have
material consequences for federal income tax purposes to Holders
of Outstanding Preferred Stock. See "Certain Federal Tax
Consequences."
THE COMMON STOCK PROXY SOLICITATION
The Company is soliciting proxies from the holders of Common
Stock and Series C Preferred Stock in connection with a special
meeting of holders of Common Stock and Series C Preferred Stock
of the Company to be held on [______], [______], 1996 at [____]
a.m. at the [______] Hotel in Los Angeles, California. Only
holders of record on [______], 1996 will be entitled to vote on
the matters to be considered.
At the special meeting, holders of Common Stock and Series C
Preferred Stock of the Company will consider and act upon
amendments to the Restated Certificate of Incorporation of the
Company to effect the following:
(i) consummate the Exchange Offer and the Series C Exchange
Offer;
(ii) amend the terms of the Outstanding Preferred Stock in
accordance with the Proposed Amendments; and
(iii) eliminate the Company's 15,000,000 shares of
Series A Common Stock and increase the number of
shares of Common Stock by a like amount and
eliminate the Company's Series C Preferred Stock.
[A copy of the Amended and Restated Certificate of
Incorporation is attached hereto as Annex [I].]
The approval of the holders of a majority of the outstanding
shares of Common Stock and Series C Preferred Stock, voting
together as a single class, of the matters set forth above is
required for the consummation of the Exchange Offer. The failure
of the Company to obtain the Common Stock Proxies would cause the
Company to seek alternatives other than the Equity
Rationalization.
The holders of a majority of the outstanding shares of
Common Stock and Series C Preferred Stock entitled to vote have
informed the Company that they intend to vote in favor of the
matters set forth above. Accordingly, the approval of the
matters submitted to a vote of the holders of Common Stock and
Series C Preferred Stock is anticipated. The Exchange Offer,
Series C Exchange Offer and Solicitations have not been
structured so that approval of at least a majority of holders
unaffiliated with the Company is required.
EXCHANGE OF SERIES C PREFERRED STOCK BY PIONEER
Pioneer Electronic Corporation, a Japanese corporation
("Pioneer"), the holder all of the issued and outstanding Series
C Preferred Stock (convertible as of September 30, 1996 into
1,172,904 shares of Common Stock), has agreed, upon the closing
of the Exchange Offer, to convert all of the Series C Preferred
Stock it holds into a combination of Common Stock and cash in the
manner described below.
Pioneer and the Company have agreed that Pioneer will
receive a minimum of [__]% of its total liquidation value as of
September 30, 1996 (such liquidation value is estimated to be
approximately $17,857,000 as of such date), and a maximum [__]%
of such liquidation value in a combination of cash and Company
Common Stock in redemption and exchange of its Series C Preferred
Stock. The minimum amount of cash to which Pioneer is entitled
is $____________. To the extent that the Company is not required
to pay to the Holders of Outstanding Preferred Stock aggregate cash
in excess of $____________ as the cash portion of the Cash and
Common Stock Consideration (which may occur if the Holders of a
substantial number of shares of Outstanding Preferred Stock
either elect to receive the Common Stock Consideration, or elect
not to exchange at all), then, to the extent that the amount
remaining after payment to the Holders of the Outstanding
Preferred Stock exceeds $____________, the Company has agreed to
increase the cash portion of the consideration to be paid in
connection with the redemption of its Series C Preferred Stock by
an amount equal to 50% of such amount in excess of $________ and
correspondingly reduce the portion of such consideration payable
in shares of Common Stock. After the foregoing cash payment to
Pioneer, the remainder of Pioneer's liquidation preference, as
multiplied by the percentage determined below, will be paid to
Pioneer in shares of Common Stock at the Market Price. The
percentage will equal ___% if Pioneer receives Cash Consideration
at least equal to ___% of its estimated liquidation value as of
September 30, 1996. To the extent that Pioneer has not received
cash equal to ___% of such liquidation value, then the percentage
will be increased by one-half of one percent for each one-percent
less than ___%.
PRO FORMA FINANCIAL DATA
LIVE is offering to exchange all outstanding shares of
Outstanding Preferred Stock (3,819,802 shares) for the Common
Stock Consideration or the Cash and Common Stock Consideration.
The following unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1995 and
for the six months ended June 30, 1996 reflect (i) the proposed
Exchange Offer (at an assumed exchange rate of 100% as to the
Outstanding Preferred Stock) with the Holders of half the
outstanding shares electing the Common Stock Consideration and
half electing the Cash and Common Stock Consideration and a
Common Stock Market Price of $_______ and (ii) the retirement of
the Outstanding Notes and the issuance of the New Notes.
Accordingly, dividends on the Outstanding Preferred Stock (as the
Proposed Amendments eliminate accrued and future dividends on the
Outstanding Preferred Stock) have been eliminated at the
beginning of the periods presented, or at a later date if issued
after the beginning of the period, and replaced with interest on
approximately $50 million of New Notes.
The historical condensed consolidated balance sheet as of
June 30, 1996 has been adjusted to give effect to the exchange of
100% of the Outstanding Preferred Stock for $___________ in cash
and ___________ shares of Common Stock; and payment of estimated
expenses relating to the Equity Rationalization, as if these
transactions had occurred on June 30, 1996 ("As Adjusted"). This
balance sheet has been further adjusted to reflect the issuance
of the New Notes and the consummation of the New LIVE Credit
Facility, net of related costs ("As Further Adjusted").
The following unaudited pro forma financial data do not
purport to be indicative of the results of operations or
financial position which actually would have been obtained if the
transactions previously described had been completed as of the
dates indicated or which may be obtained in the future.
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL DATA (UNAUDITED)
(Amounts in thousands, except per share data)
<CAPTION>
Year Ended Six Months Ended
December 31, 1995 June 30, 1996
Condensed Consolidated
Statements of Operations Historical Adjustments Pro Forma Historical Adjustments Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . $ 140,112 $ -- $ $ 72,822 $ -- $
Costs of goods sold. . . . . . 113,025 -- 59,688 --
GROSS PROFIT. . . . . . . . 27,087 -- 13,134 --
Operating expenses:
Selling, general and
administrative expense . . . 15,249 -- 8,058 --
Amortization of goodwill . . 3,925 -- 1,962 --
19,174 -- 10,020 --
7,913 -- 3,114 --
Disposal of VCL/Carolco
Communications GmbH (VCL):
Net Sales . . . . . . . . . . 32,257 -- -- -- --
Costs and Expenses. . . . . . 32,257 -- -- -- -
-- -- -- -- -- --
Gain on disposal of VCL. . . . 2,913 -- -- -- -
2,913 -- -- -- --
OPERATING PROFIT. . . . . . 10,826 -- 3,114 --
Interest and other income. . . 2,424 -- 1,312 --
Interest expense . . . . . . . (1,859) -- (812) --
INCOME BEFORE INCOME
TAXES . . . . . . . . . . 11,391 -- 3,614 --
Income tax expense. . . . . . 600 -- 904 --
NET INCOME . . . . . . 10,791 -- 2,710 --
Net income per common share:
Primary . . . . . . . . . . . $ 1.34 -- $ $ .39 -- $
Weighted average common shares
outstanding . . . . . . . . . 2,436,309 -- 2,611,937 --
Net income attributable to
common stock. . . . . . . . . $ 3,255 -- $ $ 1,027 -- $
Fully Diluted . . . . . . . . $ .53 -- $ $ .25 -- $
Weighted average number of
shares outstanding. . . . . . 20,542 -- 10,754 --
Net income attributable to
common stock. . . . . . . . . $ 10,791 -- $ $ 2,710 -- $
</TABLE>
June 30, 1996
As
Condensed Consolidated Balance Sheets Historical Adjusted
Assets:
Cash and cash equivalents . . . . . . . . . $ 15,669 $ --
Accounts receivable . . . . . . . . . . . . 9,350 --
Inventories . . . . . . . . . . . . . . . . 5,890 --
Film costs. . . . . . . . . . . . . . . . . 79,636 --
Other assets. . . . . . . . . . . . . . . . 2,714 --
Goodwill. . . . . . . . . . . . . . . . . . 23,985 --
Total assets . . . . . . . . . . . . . . . $137,244 $ --
Liabilities and stockholders' equity:
Accounts payable . . . . . . . . . . . . . $ 6,137 --
Accrued expenses. . . . . . . . . . . . . . 14,164 --
Long term and capital lease obligations . . 6,666 --
Outstanding Notes . . . . . . . . . . . . . 51,340 --
Film obligations. . . . . . . . . . . . . . 11,393 --
Other liabilities . . . . . . . . . . . . . 10,716 --
Stockholders' equity
Outstanding Preferred Stock. . . . . . . . 3,819 --
Pioneer Preferred Stock. . . . . . . . . . 15 --
Common Stock . . . . . . . . . . . . . . . 24 --
Warrants . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . 126,144 --
Retained deficit . . . . . . . . . . . . . (93,174) (--)
36,828 --
Total liabilities and stockholders' equity $137,244 $ --
Footnotes to Pro Forma Financial Data
Basis of Presentation:
(1) [To Come]
(2) [To Come]
(3) [To Come]
(4) [To Come]
(5) [To Come]
(6) [To Come]
(7) [To Come]
(8) [To Come]
(9) [To Come]
(10) [To Come]
DESCRIPTION OF SECURITIES
The Common Stock
Issue . . . . . . . . . 24,000,000 shares of Common
Stock, par value $.01 per share,
2,448,267 shares outstanding
prior to the Solicitations, up to
_________ shares outstanding
after the Solicitations, assuming
100% acceptance of the Common
Stock Consideration by the
Holders of Outstanding Preferred
Stock and a Market Price of
Common Stock equal to $_________
per share
Liquidation Preference. . Junior in liquidation preference
to all senior classes of stock
Voting Rights . . . . . Entitled to vote on all corporate
matters
Listing and Trading of Common Stock
The Company's Common Stock is listed on Nasdaq National
Market. The shares of Common Stock to be issued in
connection with the Exchange Offer will also be listed on the
Nasdaq National Market.
The Outstanding Preferred Stock
Issue . . . . . . . . . 9,000,000 shares of Outstanding
Preferred Stock authorized, par
value $1.00 per share, 3,819,802
outstanding
Liquidation Preference $10.00 per share; an aggregate of
$38,198,020 outstanding
Dividend Rate . . . . . Accruing from September 1, 1992
at 5% if paid in cash or 8% if
paid in kind; increased on May 1,
1996 to 10% if paid in cash and
12% if paid in kind
Dividend Payment Dates April 1, July 1, October 1 and January 1
Optional Redemption . . May be redeemed by the Company at
any time at 100% of liquidation
preference
Voting Rights . . . . . Entitled to elect four directors,
and more in certain
circumstances, and other voting
rights on certain corporate
events
Conversion. . . . . . . Convertible on May 1, 1996 at
$20.00 per share, resetting to
the lesser of the market price of
the Company's Common Stock or
$5.00 per share on certain dates
and in certain events
Listing and Trading of Outstanding Preferred Stock
The Outstanding Preferred Stock is listed on the Nasdaq
Small Cap Market. The Company has no present intention to
request that the Outstanding Preferred Stock be delisted from
the Nasdaq Small Cap Market after the Exchange Offer is
completed. If the Nasdaq delists the Outstanding Preferred
Stock, the Company has no intention to seek a listing for the
Outstanding Preferred Stock on any other market or exchange.
The Company expects that after the consummation of the
Exchange Offer, the trading market, if any, for the Amended
Outstanding Preferred Stock will be extremely limited.
The Amended Outstanding Preferred Stock
Issue . . . . . . . . . A maximum of 1,909,900 shares of
Amended Outstanding Preferred
Stock outstanding, par value
$1.00 per share (49.9% of number
of shares of Outstanding
Preferred Stock)
Liquidation Preference $10.00
Dividend Rate . . . . . none
Optional Redemption . . May be redeemed by the Company at
any time at 100% of liquidation
preference
Voting Rights . . . . . none
Conversion. . . . . . . Convertible at the then current
market price of the Company's
Common Stock on January 1, 1998,
January 1, 1999, January 1, 2000,
but in no event at less than
$____ per share of Common Stock,
and not convertible at any time
thereafter.
Exchange Agent and Information Agent
American Stock Transfer & Trust Company will act as
Exchange Agent for the Exchange Offer. All correspondence in
connection with the Exchange Offer and Letters of Transmittal
should be addressed to the Exchange Agent as set forth on the
back cover page hereof.
The Carreden Group Incorporated has been appointed as
Information Agent for the Solicitations. All inquiries
relating to the Solicitations should be directed to the
Information Agent at the address and telephone number set
forth on the back cover page hereof.
RISK FACTORS
Holders of Outstanding Preferred Stock should consider the
risk factors set forth below, as well as the other information
set forth in this Prospectus, prior to determining whether to
tender securities and grant Preferred Stock Consents. Holders of
Series C Preferred Stock and Common Stock should also consider
such risk factors and information prior to determining whether to
vote in favor of or in opposition to the matters on which they
are entitled to vote as set forth in this Prospectus.
Forward Looking Statements
This Prospectus contains financial forecasts and other
predictions of future events which constitute forward looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in a
number of places in this Prospectus and include statements
regarding the intent, belief or current expectations of the
Company, its Directors or officers with respect to (i) revenues
and costs of sales, (ii) operating expenses, (iii) income taxes,
(iv) film rights payments, (v) distributions, (vi) cash receipts,
(vii) cash disbursements, (viii) prevailing interest rates, (ix)
the development of alternative entertainment media or systems,
and (x) general economic conditions. Holders are cautioned that
any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual
results may differ materially from those in the forward looking
statements as a result of various factors. The Company has no
intention of updating these statements following the Commencement
of the Solicitations or anytime thereafter. The information
contained in this Prospectus, including without limitation the
information set forth below and the information under the
headings "Risk Factors," "Summary of Financial Models" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" identify important factors that could
cause such differences.
Nature of the Entertainment Industry
The entertainment industry historically has involved a
substantial degree of risk. The success of an entertainment
product depends upon unpredictable and changing factors such as
competition and audience acceptance, the availability of other
leisure time activities, including new interactive electronic
forms of competition such as the internet and on-line services,
general economic conditions and other tangible and intangible
factors, all of which change and cannot be predicted with
certainty. Therefore, there is a substantial risk that some or
all of the Company's products may not be commercially successful,
resulting in costs not being recouped or anticipated profits not
being realized.
Risks of the Motion Picture Industry
The motion picture portion of the entertainment industry is
highly speculative and inherently risky. The revenues derived
from the production and distribution of a motion picture depend
primarily upon its acceptance by the public, which represents a
response not only to the artistic components of the products, but
also to the level of advertising and promotion by the
distributor. Success cannot be predicted and does not
necessarily bear a direct correlation to the production or
distribution costs incurred. The theatrical success of a motion
picture can be a significant factor in generating revenue in
other media. Therefore, there is a substantial risk that some or
all of the Company's projects will not be commercially
successful, resulting in costs not being recouped or anticipated
profits not being realized. The Company's film production
activities require the initial expenditure of significant funds,
while revenues relating to such films and programs are generated
over an extended period of time. In addition, as a result of the
Company acquiring film product earlier in its production stages,
the possibility always exists that the finished product may be
different from that which was initially envisioned.
Risks of the Home Video Industry
The videocassette industry continues to be extremely
competitive. The availability of A+ and A titles has become
increasingly important as a company attempts to sell a broad
array of videocassette entertainment. See "Business-Home Video
Marketing and Distribution Operations." Success in the home video
market is largely dependent on a company's ability to acquire home
video rights to programming at attractive prices and upon the
subsequent performance of this programming in the marketplace.
The Company acquires home video rights on a film-by-film basis.
The Company faces substantial competition both in obtaining home
video rights and in selling videocassettes. The Company's
competitors for product acquisitions are video companies such as
New Line Home Video, HBO and Trimark, and it competes with these
companies as well as major studios, such as Paramount, Walt
Disney and Warner Bros. Pictures, in the marketing of its
product. Certain of the Company's competitors, particularly
those affiliated with major studios or pay television
broadcasters, have significantly greater financial resources than
the Company and easier access to A+ and A titles. See
"Business-Competition." The growth of "pay-per-view" methods of delivery
could also adversely affect the videocassette industry.
Shift in Strategy
During the past few years the Company has found it
increasingly difficult to acquire just the domestic home video
rights to quality motion picture productions on terms the Company
believed to be commercially attractive. This trend was
exacerbated by the bankruptcy of Carolco Pictures Inc.
("Carolco"), its most reliable source of A+ motion picture
product, and by the acquisition by major studios of a number of
independent production and distribution companies from whom the
Company had acquired video rights in the past, such as New Line
Cinema Corporation and Miramax Pictures. To counteract the
difficulty in acquiring only video rights to A+ and A titles
feature films on attractive terms, the Company has increased its
involvement in film production and the acquisition of film
product with multiple rights. This has led the Company into an area of
the business where it has a limited operating history. This
shift in strategy toward an increased emphasis on motion picture
production and acquisition may increase the rewards available to
the Company, but may increase the risks as well.
Availability of Financing
The entertainment industry is very capital intensive.
Motion picture budgets have risen for several years as the cost
of talent and other components increases. The Company's ability
to continue to produce or acquire motion pictures for
distribution is dependent on its ability to finance its
activities. There is no assurance that the Company will continue
to have adequate financing available to it in the future.
Financial Condition of the Company and Working Capital Needs
The Company has reported net income for the past eight
fiscal quarters and has sufficient cash on hand and available
under its existing working capital line to meet its immediate
financial needs. However, the operations of the Company require
significant additional working capital. The acquisition by LFM
of rights to feature films typically requires commitments that
generally range from $1 million to $30 million for a major
theatrical film and correspondingly lesser amounts for lesser
titles. Portions of these commitments usually are funded five to
eighteen months prior to release of the related feature films.
As of June 30, 1996, LFM had commitments to pay an aggregate of
approximately $17 million in connection with existing feature
film obligations, and substantially all of such commitments as of
June 30, 1996 are payable over a period of twelve months. The
production and distribution of theatrical motion pictures, an
aspect of the entertainment industry in which LFM has recently
become more involved, requires commitments of capital which may
not be recouped until the theatrical motion picture is released
in the home video, foreign and other ancillary markets. See
"Business."
In addition, LIVE's Existing Credit Facility matures in 1997
and the Outstanding Notes require payments of $20 million in each
of 1998 and 1999. Thus, the Company has potential repayment
obligations of up to $70 million in the next three years on its
funded indebtedness. Absent successful completion of the Equity
Rationalization and issuance of the New Notes and the New LIVE
Credit Facility, the Company may not have the capital resources
necessary to replace the Existing Credit Facility or to pay the
Outstanding Notes when due. Similarly, if the Company is
required to devote all its capital resources to pay the
obligations of the Outstanding Notes in 1998 and 1999, it may not
have sufficient capital available to meet its business needs. In
addition, to conserve capital the Company will consider no longer
paying cash dividends on the Outstanding Preferred Stock if the
transactions described herein are not consummated. The Equity
Rationalization will, however, increase the Company's overall
interest payments. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and
Capital Resources."
Dependence on Key Personnel
The Company is dependent on the efforts and abilities of its
senior management, particularly Roger Burlage, the Company's
Chief Executive Officer. While the Company and Mr. Burlage are
negotiating an extension to his Employment Agreement to become
effective as of the closing of the Equity Rationalization (see
"Executive Compensation-Employment and Consulting Agreements"),
the loss of Mr. Burlage or any of the Company's other key
executives could have an adverse effect on the business and
prospects of the Company.
Required Vote
In order to effect the Equity Rationalization, it is
necessary for the Company to receive the Requisite Acceptances,
including, among other things, acceptance of the Exchange Offer
by, and receipt of Preferred Stock Consents of, the Holders of a
majority of the shares of Outstanding Preferred Stock. Any
failure to consent by a Holder will be treated as a rejection of
the Exchange Offer and Preferred Stock Consents. There can be no
assurance that the Company will be able to obtain the Requisite
Acceptances. The Exchange Offer has not been structured so that
approval of at least a majority of the Holders who are
unaffiliated with the Company is required. See "The Exchange
Offer-Conditions of the Exchange Offer."
Consequences to Non-Tendering Holders of Outstanding Preferred
Stock
If the Equity Rationalization is consummated, the Holders
who do not accept the Exchange Offer will lose the benefit of
numerous provisions in the Outstanding Preferred Stock. The
Proposed Amendments to the Outstanding Preferred Stock will
eliminate certain rights of Holders thereof to vote and all
rights to receive dividend payments (including dividends in
arrears) and limit the right to convert such shares into Common
Stock. See "Amendments to Outstanding Preferred Stock." These
events are likely to have a materially adverse effect on the
value of the Amended Outstanding Preferred Stock.
Absence of Public Market
The Outstanding Preferred Stock is currently listed on the
Nasdaq Small Cap Market. Because the number of Holders after the
consummation of the Equity Rationalization is expected to be
limited, it is unlikely that there will be any significant active
trading in the Amended Outstanding Preferred Stock. The Company
has no intention to request that the Outstanding Preferred Stock
be delisted from the Nasdaq Small Cap Market. However, if the
Nasdaq delists the Outstanding Preferred Stock, the Company has
no intention to seek a listing for the Outstanding Preferred
Stock on any other market or exchange. (The Outstanding
Preferred Stock is presently held by so few record holders that
it may be deregistered by the Company under the Exchange Act at
any time.)
Possible Volatility of Stock Prices
The stock market has, from time to time, experienced price
and value fluctuations that have been unrelated to the operating
performance of a particular company. The market place of the
Common Stock may be significantly affected by quarterly
variations in the Company's operating results, changes in
financial estimates by securities analysts or failures by the
Company to reach such estimates, litigation involving the
Company, general trends in the entertainment industry, actions by
governmental agencies, national, economic and stock market
conditions, industry reports and other factors, many of which are
beyond the control of the Company. In addition, it may be
expected that the market price of the Company's Common Stock will
be affected by the substantial increase in the number of shares
of Common Stock outstanding after the Closing Date of the
Exchange Offer. It is impossible to predict whether the
beneficial impact of increased liquidity in the Common Stock will
be outweighed by the additional supply of available shares.
Finally, it can also be expected that the market price of the
Amended Outstanding Preferred Stock will be adversely affected
by the consummation of the Exchange Offer and Proposed
Amendments.
Holding Company Structure
As a holding company, the Company conducts all of its
operations through its subsidiaries and relies principally on
income from dividends, interest payments and intercompany loans
from its subsidiaries to obtain funds necessary for the payment
of principal of and interest on its indebtedness and to pay cash
dividends on the Outstanding Preferred Stock. Any right of the
Company or the Holders to participate in the assets of any of the
Company's subsidiaries upon the latter's liquidation or
recapitalization will be subject to the claims of the
subsidiary's creditors, except to the extent the Company is
itself recognized as a creditor of such subsidiary, in which case
the Company's claims would still be subject to any security
interests in such subsidiary and any liabilities of such
subsidiary senior to those owed to the Company or except if the
Company and its subsidiaries are substantively consolidated into
a single plan of reorganization.
Control by and Benefits to Certain Parties
Pioneer presently owns approximately 26% of the outstanding
Common Stock and all of the Series C Preferred Stock of the
Company, constituting an aggregate of approximately 50% of the
Company's voting securities. Upon consummation of the Equity
Rationalization, Pioneer could own a maximum of approximately
[____]% of the outstanding Common Stock of the Company (assuming
all Holders of Outstanding Preferred Stock accept the Cash and
Common Stock consideration and the Market Price of LIVE Common
Stock is $__________ per share), see "Description of Capital
Stock" and "Certain Relationships and Related Transactions."
Therefore, it is likely Pioneer will remain the largest single
stockholder of the Company after the Exchange Offer. Because the
Company's Restated Certificate of Incorporation does not provide
for cumulative voting in the election of Directors, should it
desire to do so, Pioneer could likely cause the election of all
of its nominees to the Company's Board of Directors.
Federal Income Tax Consequences
In general, Holders of Outstanding Preferred Stock who
participate in the Exchange Offer and elect to receive the Cash
and Common Stock Consideration should, for federal income tax
purposes, recognize gain (but not loss) but only to the extent of
the cash consideration received. A Holder's gain will equal the
excess (if any) of (a) the sum of (i) the amount of cash
consideration received and (ii) the fair market value of the
Common Stock received, over (b) the Holder's adjusted tax basis
in the Outstanding Preferred Stock exchanged. Any gain
recognized as a result of the Exchange Offer should be capital
gain. Holders of Outstanding Preferred Stock who participate in
the Exchange Offer and elect to receive the Common Stock
Consideration should, for federal income tax purposes, not
recognize any gain or loss (except to the extent such Holders
receive cash in lieu of fractional shares). Holders of Common
Stock and Outstanding Preferred Stock who do not participate in
the Exchange Offer should not recognize any gain or loss for
federal income tax purposes. DUE TO THE UNCERTAINTIES REGARDING
THE TAX TREATMENT OF THE EXCHANGE OFFER, EACH HOLDER OF
OUTSTANDING PREFERRED STOCK IS URGED TO CONSULT HIS PERSONAL TAX
ADVISOR. For a more detailed discussion of the tax consequences,
see "Certain Federal Income Tax Consequences."
THE EXCHANGE OFFER
General
Upon the terms and subject to the conditions of the Exchange
Offer, the Company is offering to exchange the Common Stock
Consideration OR the Cash and Common Stock Consideration for each
share of Outstanding Preferred Stock, as described below:
The Common Stock Consideration for each share of Outstanding
Preferred Stock is equal to that number of shares of the
Company's Common Stock equal to [STOCK%] times the liquidation
value of a share of Outstanding Preferred Stock ($10.00 per
share) divided by the Market Price of the Company's Common Stock.
The Market Price of the Company's Common Stock will be determined
based upon a formula to be announced prior to the commencement of
the Solicitations, but in no event less than [$ MIN PRICE]
("Market Price").
The Cash and Common Stock Consideration for each share of
Outstanding Preferred Stock is equal to [CASH%] times the
liquidation value of a share of Outstanding Preferred Stock
($10.00 per share) in total value comprised of a Cash Portion and
the remainder in Common Stock valued at the Market Price. The
Cash Portion available for each share of Outstanding Preferred
Stock which elects to receive the Cash and Common Stock
Consideration will equal [$ CASH AVAILABLE] divided by the number
of shares of Outstanding Preferred Stock which elect to receive
the Cash and Common Stock Consideration, but the Cash Portion may
be no more than [$ MAX PRICE] nor less than [$ MIN PRICE] per
share of Outstanding Preferred Stock. If every Holder of
Outstanding Preferred Stock elects to participate in the Exchange
Offer and to receive the Cash and Common Stock Consideration, the
Holders of Outstanding Preferred Stock will receive [$ MIN PRICE]
per share of such Outstanding Preferred Stock in cash and the
remainder in Company Common Stock valued at the Market Price. If
no more than ___% of the Holders of Outstanding Preferred Stock
elect to receive the Cash and Common Stock Consideration, such
Holders will receive a Cash Portion equal to [$ MAX PRICE] per
share of such Outstanding Preferred Stock and the remainder in
Common Stock valued at the Market Price.
As of the date hereof, 3,819,802 shares of Outstanding
Preferred Stock are issued and outstanding. Copies of this
Prospectus and the Letters of Transmittal are being sent to all
holders of record and known beneficial holders of Outstanding
Preferred Stock as of [______], 1996. If all of the Outstanding
Preferred Stock is exchanged pursuant to the Exchange Offer for
the Common Stock Consideration, the Company could be required to
issue a maximum of [______] shares of Common Stock (if the Market
Price of Company Common Stock is $______________ per share in
connection with the Exchange Offer). If all of the Holders of
Outstanding Preferred Stock accept the Cash and Common Stock
Consideration, the Company could be required to pay up to a
maximum of $[______] in cash in connection with the Exchange
Offer.
Holders of Outstanding Preferred Stock who desire to tender
Outstanding Preferred Stock in the Exchange Offer will be
required to consent to the Proposed Amendments. See "-The
Preferred Stock Consents," "-Conditions of the Exchange Offer"
and "-The Proposed Amendments." THE TENDER OF SHARES OF
OUTSTANDING PREFERRED STOCK BY THE HOLDER THEREOF PURSUANT TO THE
EXCHANGE OFFER WILL CONSTITUTE THE CONSENT OF SUCH TENDERING
HOLDER TO THE PROPOSED AMENDMENTS WITH RESPECT TO SUCH SHARES OF
OUTSTANDING PREFERRED STOCK.
Although it has no obligation or intention to do so, the
Company reserves the right in the future to seek to acquire
Amended Outstanding Preferred Stock not tendered in the Exchange
Offer by means of open market purchases, privately negotiated
acquisitions, subsequent exchange or tender offers, redemptions
or otherwise, at prices or on terms which may be higher or lower
or more or less favorable than those in the Exchange Offer. The
terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
Tendering Holders will not be obligated to pay brokerage
commissions, fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of
Outstanding Preferred Stock pursuant to the Exchange Offer. The
Company intends to pay all charges and expenses, other than any
applicable taxes, in connection with the Exchange Offer.
The Company expressly reserves the right, at its discretion,
subject to applicable law, to (i) delay acceptance for exchange
of any Outstanding Preferred Stock, or to terminate the Exchange
Offer and not accept for exchange any Outstanding Preferred Stock
and promptly return all Outstanding Preferred Stock to the
tendering Holders thereof, upon the failure of any of the
conditions specified in "-Conditions of the Exchange Offer"
below, (ii) waive any condition to the Exchange Offer (provided
that the Company will not waive the Requisite Acceptance
Conditions (as defined under "-Conditions of the Exchange Offer")
with respect to the Exchange Offer without making a public
announcement thereof and permitting the withdrawal of Outstanding
Preferred Stock tendered pursuant to the Exchange Offer for a
period of five business days following such public announcement)
and accept all Outstanding Preferred Stock previously tendered,
(iii) extend the Expiration Date of the Exchange Offer and retain
all tendered Outstanding Preferred Stock until the final
expiration of the Exchange Offer, (iv) except as otherwise set
forth herein, amend the terms of the Exchange Offer, or (v)
modify the form or amount of the consideration to be paid
pursuant to the Exchange Offer, provided that any such modified
consideration will be provided to all tendering Holders, even if
they tendered their Outstanding Preferred Stock in such Exchange
Offer prior to the modification, and provided further that no
decrease in the amount of Outstanding Preferred Stock being
sought or increase or decrease in the consideration offered in
the Exchange Offer will be made unless the Exchange Offer will
remain open for at least ten business days from the date that
notice of such increase or decrease is first published, sent or
given to Holders of the Outstanding Preferred Stock. Any
amendment applicable to the Exchange Offer will apply to all
Outstanding Preferred Stock tendered pursuant to the Exchange
Offer.
Background and Purpose of the Exchange Offer
The Equity Rationalization culminates a series of events
which began in 1993 when the Company successfully emerged from a
prepackaged Chapter 11 reorganization which converted $110
million of senior subordinated debt due 1999 and $21 million in
liquidation preference of Series A Preferred Stock into $40
million of Outstanding Notes and $60 million in liquidation value
of Outstanding Preferred Stock. Since the Company's
reorganization, the Company has purchased in open market
transactions and retired approximately 2,177,500 shares of the
Outstanding Preferred Stock ($21,775,000 of liquidation value) at
an average price per share of approximately $4.27. The Company
agreed that, upon consummation of its 1993 Chapter 11
restructuring, two Directors would be elected by the holders of
the Outstanding Preferred Stock with the number to increase to
four in 1996 and, under certain limited circumstances, to a
majority of the Board of Directors. In addition, the Outstanding
Preferred Stock was to become convertible at $20 per share in May
1996 with the conversion price decreasing by $1.25 per quarter
until September 1998 when the conversion price would decrease to
the lower of $5 per share or the then market price of the
Company's Common Stock. The dividend rate on the Outstanding
Preferred Stock increased in May 1996 from 5% per
annum to 10% per annum (for payments in cash) and from 6% per
annum to 12% per annum (for payments in kind). The decreasing
conversion price and the increase in the dividend rate was
intended to create an incentive to redeem or restructure the
Outstanding Preferred Stock as soon as possible. Similarly, the
Outstanding Notes, with a $20 million payment required in 1998
and the remaining $20 million due in 1999, requires management to
obtain replacement financing prior to the first principal paydown
in 1998.
In March 1996, the Company retained Carreden to act as its
exclusive financial advisor in connection with a rationalization
of the Company's current capitalization. Carreden was retained
to advise the Company's Board of Directors in a review of the
Company's business operations and capital structure and to
develop alternatives that will accomplish the strategic and
financial objectives of the Company by securing for the Company a
more stable and appropriate capital base on which to operate in
the future.
Company management and its advisors believe that the
Exchange Offer for the Outstanding Preferred Stock is necessary
for the Company to arrange for replacement of the Outstanding
Notes and to obtain the increased New LIVE Credit Facility, which
will in turn provide the Company with sufficient capital to
execute its business plan. For example, the purchasers with whom
the New Notes have been discussed have indicated a willingness to
consider providing $50 million of capital to the Company, subject
to the successful completion of the Equity Rationalization.
However, such purchasers have not been willing to provide funds
to the Company without assurances of continued stability in the
Company's management and ownership structure. The lenders with
whom the Company has discussed the terms of the New LIVE Credit
Facility have also indicated an unwillingness to lend funds to
the Company as long as the uncertainty created by the Outstanding
Preferred Stock and the Outstanding Notes continues.
With the assistance of Carreden, management of the Company
has:
Begun to discuss and negotiate a new $50 million issue of
Senior Subordinated Notes and Convertible Subordinated Notes to
purchase common stock due [____] (collectively the "New Notes")
with a limited group of private investors. The closing of the
purchase of the New Notes is expected to be conditioned upon the
successful completion of the Solicitations. There is no
assurance that agreement will be reached with respect thereto.
See "Description of New Notes."
Secured an understanding with Pioneer, the holder of
approximately 26% of the Company's Common Stock and all of the
Company's Series C Preferred Stock to exchange all of its
holdings of Series C Preferred Stock (with an anticipated
liquidation preference of approximately $17,857,000 on September
30, 1996) for a minimum of $___________ in cash plus an
additional number of shares of the Company's Common Stock
determined in accordance with the formula described in "Exchange
of Series C Preferred Stock by Pioneer."
Begun negotiating for the New LIVE Credit Facility for LFM.
Obtaining the New LIVE Credit Facility is a condition to
consummation of the Equity Rationalization. There is no
assurance that agreement will be reached with respect thereto.
See "New LIVE Credit Facility."
Consummation of the Equity Rationalization would result in
the elimination of approximately $3.8 million of annual dividend
payments called for under the terms of the Outstanding Preferred
Stock as well as approximately $750 thousand of annual dividends
on the face amount of the Series C Preferred Stock. In addition, the
elimination of the future dilutive issue of Outstanding Preferred
Stock by virtue of the Exchange Offer, and the extension of the due
date on the Company's subordinated debt, will bring stability to the
Company's capital structure and allow management to focus on the
Company's core businesses rather than on the Company's liquidity
needs. Consummation of the Equity Rationalization will, however,
increase the Company's total interest expense. See "Description
of Outstanding Preferred Stock" and "Description of Outstanding
Notes."
Recommendation of the Board of Directors of the Company
Prior to commencement of the Solicitations, the Board of
Directors of the Company is expected to retain an additional
financial advisor (the "Special Financial Advisor") to assist it,
together with Carreden, in reviewing the fairness of the Equity
Rationalization to the Holders of the Outstanding Preferred Stock
and the holders of Common Stock, respectively, The Board of
Directors will request a fairness opinion from each of the
Carreden and the Special Financial Advisor. The Board of
Directors does not expect to commence the Solicitations or
recommend that the Holders accept the Exchange Offer and approve
the Preferred Stock Consents, and that the holders of the
Company's Common Stock and Series C Preferred Stock approve the
Exchange Offer, the Series C Exchange Offer and the amendments to
the Restated Certificate of Incorporation, if it does not believe
that the Solicitations are fair, from a financial point of view,
to the holders of the Outstanding Preferred Stock and Common
Stock. In arriving at its decision, the Board of Directors
expects to consider, among other things, the following factors:
1. The Board of Directors' familiarity with the Company's
business, operations and financial condition and its future
prospects, including the difficulty of the Company to obtain
adequate financing for its ongoing operations as long as the
Outstanding Preferred Stock remains outstanding. The Board
believes that without adequate financing, the Company will be
unable to fulfill its business plan.
2. The availability of viable alternatives for the Company
to obtain the continued bank financing and new subordinated debt
financing necessary for the Company to repay the Outstanding
Notes and finance its ongoing operations.
3. Presentations by the Company's management and its legal
advisors, each of whom is expected to review various
considerations with the Board of Directors.
4. Presentations by the Company's financial advisor,
Carreden, including the results of discussions with other parties
concerning proposals for the Equity Rationalization. In
particular, the Board of Directors is expected to place
substantial weight on the willingness of the purchasers of the
New Notes to complete such purchase only upon successful
completion of the Exchange Offer.
5. The advice of Carreden that the Exchange Offer was fair
from a financial point of view to the Holders of Outstanding
Preferred Stock.
6. The advice of the Special Financial Advisor that the
Equity Rationalization was fair, from a financial point of view,
to the holders of the Company's Common Stock other than Pioneer.
Based on the foregoing, the Company's Board of Directors is
expected to review the Equity Rationalization, including its
fairness, from a financial point of view, to the Holders and to
the holders of the Company's Common Stock. The Board of
Directors will not commence the Solicitations or recommend
approval of the other elements of the Equity Rationalization
unless it believes that the Equity Rationalization is fair, from
a financial point of view, to the Holders and the holders of the
Company's Common Stock.
Opinion of Carreden
The Company will ask Carreden to render an opinion to the
Board of Directors as to the fairness from a financial point of
view, of the Equity Rationalization to the Holders of the
Outstanding Preferred Stock. The full text of Carreden's opinion
will be set forth as Annex A to this Prospectus. Carreden is a
national investment banking firm which regularly engages in, among
other things, advising businesses in connection with mergers and
acquisition and levered buyouts.
The Company has retained Carreden to provide investment banking
services in connection with the Equity Rationalization. Pursuant to
a letter agreement dated March 14, 1996 between the Company and
Carreden, the Company has agreed to pay Carreden a fee of $50,000, or
if the Exchange Offer is consummated, a fee of 1-1/2% of the liquidation
value of the Outstanding Preferred Stock and the principal amount of the
Outstanding Notes. The Company has also agreed to reimburse Carreden
for certain reasonable out-of-pocket expenses, including fees and
disbursements of its legal counsel. The Company has also agreed to
indemnify Carreden and its officers, directors, agents, employees and
controlling persons against certain losses or liabilities arising out
of Carreden's engagement. The Company has retained Carreden in
connection with raising new capital for the Company.
Except as set forth above and under the headings, "Opinion of the
Special Financial Advisor" and "Payments for Solicitations; Payments for
Expenses", neither the Company nor any person acting on its behalf has
or currently intends to employ, retain or compensate any person to make
solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Exchange Offer.
Opinion of the Special Financial Advisor
The Company is also considering retaining a Special
Financial Advisor to render an opinion to the Board of Directors
as to the fairness from a financial point of view, of the Equity
Rationalization to the holders of the Common Stock of the
Company. If a Special Advisor is retained, its engagement would
be limited to a review of the Equity Rationalization and
delivering its opinion. The full text of its opinion will be set
forth as Annex B to this Prospectus. The Special Financial
Advisor will receive a fixed fee negotiated in advance and not
contingent upon the success or failure of the Solicitations.
Effects of Consummation of Exchange Offer on Non-Tendering
Holders of Outstanding Preferred Stock
The completion of the Exchange Offer may have significant
adverse consequences for the Holders of untendered Outstanding
Preferred Stock. The exchange of Outstanding Preferred Stock
pursuant to the Exchange Offer will significantly reduce the
number of shares of Outstanding Preferred Stock that might
otherwise trade publicly. Generally, a security with a smaller
outstanding principal amount or number of shares available for
trading ("float") may command a lower price than that of a
comparable security with a greater float. Therefore, the market
price for untendered shares of Outstanding Preferred Stock may be
adversely affected to the extent that the number of shares of
Outstanding Preferred Stock tendered pursuant to the Exchange
Offer reduces the float. In addition, upon effectiveness of the
Proposed Amendments, numerous provisions of the Outstanding
Preferred Stock will be deleted and most rights in the
Outstanding Preferred Stock to vote and convert into Common
Stock, and all rights to dividends (including accrued dividends)
will be eliminated. As a result, the effectiveness of the
Proposed Amendments may have a material adverse effect on the
value of the Amended Outstanding Preferred Stock. See "Proposed
Amendments to the Outstanding Preferred Stock." However, as
indicated under "Background and Purposes of the Exchange Offer,"
the failure to consummate the Exchange Offer may also have
significant adverse consequences for holders of Outstanding
Preferred Stock.
No appraisal rights are available to Holders of the
Outstanding Preferred Stock or the holders of the Company's
Common Stock or Series C Preferred Stock in connection with the
Exchange Offer or Series C Exchange Offer.
Expiration; Extension
The Exchange Offer will expire at 5:00 p.m., New York City
time, on [______], [______], 1996, or at any later time and date
to which such Exchange Offer may from time to time be extended by
the Company.
The Company expressly reserves the right at any time or from
time to time, to extend the period of time for which the Exchange
Offer is to remain open by giving oral or written notice to the
Exchange Agent and making a public announcement of such extension
no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Any such
notice or announcement of an extension will include disclosure of
the approximate principal amount of Outstanding Preferred Stock
theretofore validly tendered pursuant thereto and not properly
withdrawn. Any expiration of the Exchange Offer will be followed
as promptly as practicable by a public announcement. Without
limiting the manner in which the Company may choose to make a
public announcement, the Company will not, unless otherwise
required by law, have any obligation to publish, advertise, or
otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
Proposed Amendments
TENDERING HOLDERS MUST CONSENT TO THE PROPOSED AMENDMENTS IN
RESPECT OF THEIR OUTSTANDING PREFERRED STOCK. The Company is
also soliciting Preferred Stock Consents from Holders who do not
desire to accept the Exchange Offer. Pursuant to the terms of
the Letters of Transmittal, the completion, execution and
delivery thereof by the Record Holder will constitute consent to
the Proposed Amendments whether or not the Holder tenders any
Outstanding Preferred Stock.
For the Proposed Amendments to become effective with respect
to the Outstanding Preferred Stock, Record Holders of more than
50% of the aggregate number of shares of Outstanding Preferred
Stock must grant a Preferred Stock Consent with respect thereto
and such valid and unrevoked Preferred Stock Consents must have
been delivered to the Exchange Agent. Subject to the conditions
to the consummation of the Exchange Offer set forth in this
Prospectus, including the Company being satisfied that it has
received the Requisite Acceptances to the Proposed Amendments,
the Certificate of Amendment to Restated Certificate of
Incorporation will be executed and filed with the Secretary of
State of the State of Delaware and will become effective
immediately thereafter. However, the provisions of the Proposed
Amendments, by the terms of the Proposed Amendments, will not
become operative prior to the acceptance for exchange of more
than 50% of the aggregate number of shares of Outstanding
Preferred Stock. The Exchange Offer has not been structured so
that approval of at least a majority of Holders unaffiliated with
the Company is required.
Only a Record Holder of the Outstanding Preferred Stock can
effectively consent to the Proposed Amendments. See "-Procedure
for Tendering Outstanding Preferred Stock and Giving Consents"
for information concerning tendering procedures for persons who
are not Record Holders. No transfer of Outstanding Preferred
Stock on the register for such Outstanding Preferred Stock prior
to the Effective Date therefor will have the effect of revoking
any consent theretofore given by the Record Holder of such
Outstanding Preferred Stock, and such consent will remain valid
unless revoked by the person in whose name the Outstanding
Preferred Stock is then registered on the register for the
Outstanding Preferred Stock. Such revocation will become
effective only if the Exchange Agent receives the notice of
revocation before the Expiration Date. See "-Revocation of
Consents; Defective Tender" below. As set forth below under
"-Withdrawal Rights," the withdrawal of Outstanding Preferred Stock
in accordance with the procedures set forth thereunder will not
effect revocation of a Preferred Stock Consent.
Dividends on Outstanding Preferred Stock
Upon effectiveness of the Proposed Amendments, Holders of
shares of Outstanding Preferred Stock will cease to have any
right to the payment of dividends, including dividends in
arrears. See "Proposed Amendments to Outstanding Preferred
Stock."
Conditions of the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer,
the Company will not be required to accept any Outstanding
Preferred Stock tendered for exchange and may terminate or amend
the Exchange Offer as provided herein if any of the following
conditions shall not be satisfied:
(a) more than 50% of the aggregate number of issued
and outstanding shares of Outstanding Preferred Stock shall
have been validly tendered and not withdrawn pursuant to the
Exchange Offer prior to the Expiration Date and the Holders
thereof shall have given and not revoked their Preferred
Stock Consents to the Proposed Amendments;
(b) prior to the Expiration Date, the holders of at
least a majority of the Common Stock and the Series C
Preferred Stock, voting together as a single class, shall
have approved the Exchange Offer and the amendments to the
Restated Certificate of Incorporation of the Company;
(c) on the Expiration Date, the holder of the Series C
Preferred Stock shall have accepted the Series C Exchange
Offer;
(d) on or prior to the Expiration Date, the Company
and the purchasers of the New Notes shall have executed and
delivered the New Notes and all conditions to the
effectiveness thereof, other than the consummation of the
Exchange Offer, the Series C Exchange Offer, and the
retirement of the Outstanding Notes, shall have been
satisfied or waived;
(e) on or prior to the Expiration Date, the Company
and the lenders under the New LIVE Credit Facility shall
have executed and delivered the New LIVE Credit Facility and
all conditions to the effectiveness thereof, other than the
consummation of the Exchange Offer, the Series C Exchange
Offer, and the retirement of the Existing Credit Facility,
shall have been satisfied or waived;
(f) there shall not have been instituted before any
court or governmental agency, authority or body or any
arbitrator any action or proceeding (i) challenging the
acquisition of Outstanding Preferred Stock or the payment of
cash and issuance of Common Stock in exchange therefor
pursuant to the Exchange Offer, or (ii) in the sole judgment
of the Company, otherwise materially adversely affecting the
transactions contemplated by the Exchange Offer or the
contemplated benefits of the Exchange Offer to the Company;
(g) there shall not have been proposed or enacted any
statute or other legislation, rule or regulation, and no
action shall have been taken by any governmental authority,
which would or might, in the sole judgment of the Company,
prohibit, restrict or delay consummation of the Exchange
Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company;
(h) there shall not exist, in the sole judgment of the
Company, any other actual or threatened legal impediment to
the acquisition by the Company of Outstanding Preferred
Stock or to the issuance of the Common Stock or payment of
cash in exchange therefor pursuant to the Exchange Offer or
any other circumstances that would materially adversely
affect the transactions contemplated by the Exchange Offer
or the contemplated benefits of the Exchange Offer to the
Company;
(i) there shall not have occurred, in the sole
judgment of the Company, (i) any general suspension of
trading in, or limitation on prices for, securities listed
on the Nasdaq or New York Stock Exchange; or (ii) a
declaration of a banking moratorium or any suspension of
payments in respect of the banks in the United States
(whether or not mandatory); or (iii) a commencement of a
war, armed hostilities or other international or national
emergency directly or indirectly involving the United
States; or (iv) any significant change in the United States
or any other currency exchange rates or a suspension of, or
limitation on, the markets therefor (whether or not
mandatory); or (v) any limitation (whether or not mandatory)
by any governmental authority on, or any other event having
reasonable likelihood of affecting, the extension of credit
by banks or other lending institutions in the United States;
or (vi) in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, in the sole
judgment of the Company, a material acceleration or
worsening thereof;
(j) the Amended Outstanding Preferred Stock and Common
Stock to be issued as a result of the Exchange Offer and the
Series C Exchange Offer shall have been registered under the
Securities Act and there shall not be issued and in effect a
stop order issued by the Commission with respect to the
registration and issuance of the foregoing; and
(k) there shall not have occurred or be likely to
occur an event affecting the business or financial affairs
of the Company and its subsidiaries or the Exchange Offer
which, in the sole judgment of the Company, would or might
prohibit, restrict or delay the consummation of the Exchange
Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company or otherwise result in
consummation of the Exchange Offer not being in the best
interests of the Company.
If any of the foregoing conditions shall not be satisfied,
the Company may (i) terminate the Exchange Offer and return all
Outstanding Preferred Stock tendered pursuant to such terminated
Exchange Offer to exchanging Holders, (ii) extend the Exchange
Offer and retain all tendered Outstanding Preferred Stock until
the final Expiration Date for the extended Exchange Offer or
(iii) waive the unsatisfied conditions with respect to the
Exchange Offer (provided that the Company will not waive the
conditions referred to in paragraphs (a) through (e) above
(collectively, the "Requisite Acceptance Conditions") with
respect to the Exchange Offer without making a public
announcement thereof and permitting the withdrawal of Outstanding
Preferred Stock tendered pursuant to the Exchange Offer for a
period of five business days following such public announcement)
and accept all Outstanding Preferred Stock tendered pursuant to
the Exchange Offer.
All the foregoing conditions are for the sole benefit of the
Company and may be asserted by the Company regardless of the
circumstances giving rise to such condition and may be waived by
the Company (other than as stated in the preceding paragraph), in
whole or in part, at any time and from time to time, in the sole
discretion of the Company. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to
time.
Sources of Funds for Exchange Offer and Equity Rationalization
It is a condition to the consummation of the Exchange Offer
that the Company obtain the New LIVE Credit Facility and issue
the New Notes. See "-Conditions of the Exchange Offer" and
"Business-Recent Developments for the Company-New LIVE Credit
Facility." Management estimates that the Company will be
required to make cash payments of up to approximately $[______]
in connection with the consummation of the Equity
Rationalization. Cash generated from operations, and up to
approximately $[______] from cash on hand or cash to be received
from the New LIVE Credit Facility and the New Notes, will be used
to make the cash payment to Holders, to repay the Outstanding
Notes, and pay expenses and fees relating to the Equity
Rationalization. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and
Capital Resources."
Payments for Solicitations; Payment of Expenses
The Company has retained D.F. King & Co. to solicit tenders
of Outstanding Preferred Stock and Preferred Stock Consents
pursuant to the Preferred Stock Consent. D.F. King will receive
a fee of approximately $7,000 for its services, plus
reimbursement of out-of-pocket expenses. The Company has also
agreed to indemnify D.F. King against certain liabilities. The
Company will pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Outstanding Preferred Stock
and Common Stock, and in handling and forwarding tenders to the
Company.
The expenses to be incurred in connection with the
Solicitations, including the fees and expenses of D.F. King, the
Special Financial Advisor, and Carreden, and printing, filing,
accounting and legal fees, will be paid by the Company and are
estimated to be approximately $[______] (a portion of which may
have been paid prior to the Closing). The Company intends to use
funds from the New Notes, the New LIVE Credit Facility, and funds
generated from operations, to pay such amounts. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
PROPOSED AMENDMENTS TO OUTSTANDING PREFERRED STOCK
The Company is seeking the Preferred Stock Consents to the
Proposed Amendments from the Holders of Outstanding Preferred
Stock. The Proposed Amendments, described below, would, among
other things, eliminate dividend rights and accruals and voting
rights of Holders of Outstanding Preferred Stock and certain
other rights of such Holders. If the Proposed Amendments are
adopted, the Board of Directors of the Company will file with the
Delaware Secretary of State an Amended and Restated Certificate
of Incorporation incorporating such amendments, a copy of which
is attached as Annex J hereto.
The following summary of the Proposed Amendments does not
purport to be complete and is qualified in its entirety by
reference to the Amended Certificate of Incorporation.
The Proposed Amendments would:
(a) Eliminate the right of Holders
to receive any Dividends except
such as are authorized by the Board
of Directors, and cancel all
Dividends accrued and unpaid as of
the effective date of the Proposed
Amendments (Paragraph 1.1);
(b) Eliminate the right of the
Holders to receive on Liquidation
an amount equal to Dividends
accumulated and unpaid with respect
to each share up to the date of the
final distribution in Liquidation
(Paragraph 2.1);
(c) Eliminate all voting
rights of Holders, including
special voting rights to elect
board members, except to
further amend the Restated
Certificate of Incorporation,
as it relates to the Amended
Outstanding Preferred Stock or
as otherwise provided by law
(Paragraph 3);
(d) Eliminate the special
adjustment of conversion price, and
amend the conversion provisions to
provide for optional conversion at
the then market price of the
Company's Common Stock on January 1, 1998,
1999, 2000 (but never less
than $_____ per share) and not
thereafter, and relieve the Company
of the obligation to pay transfer
and similar taxes upon conversion;
(e) Expressly subordinate the
Amended Outstanding Preferred Stock
to all other series of preferred
stock as to both liquidation
preference and dividends (Paragraph
6); and
(f) Reduce the number of
authorized shares to the amount
remaining outstanding after the
Equity Rationalization is completed.
Parenthetical references are to the applicable paragraph of
the current Certificate of Designations of the Outstanding
Preferred Stock. The consummation of the Exchange Offer and the
adoption of the Proposed Amendments may have certain material
adverse consequences to non-tendering Holders of Outstanding
Preferred Stock. See "Risk Factors-Consequences to Non-Tendering
Holders of Outstanding Preferred Stock."
If the Proposed Amendments become operative, the
non-tendering Holders of Outstanding Preferred Stock will be bound
thereby regardless of whether they consented to the Proposed
Amendments. Holders should consider carefully the effect of the
Proposed Amendments on their position as Holders if they elect
not to tender Outstanding Preferred Stock in the Exchange Offer.
Holders will not be able to validly tender into the Exchange
Offer unless they have submitted a properly completed, valid and
unrevoked Preferred Stock Consent.
COMMON STOCK PROXY SOLICITATION
A special meeting (the "Special Meeting") of holders of
Common Stock and Series C Preferred Stock of the Company will be
held at [______], [______], Los Angeles, California 900[__] on
[______], [______], 1996 at [______] a.m., local time, to
consider and act upon amendments to the Restated Certificate of
Incorporation of the Company to effect the following:
(i) consummate the Exchange Offer and the Series C Exchange Offer;
(ii) amend the terms of the Outstanding Preferred Stock in
accordance with the Proposed Amendments; and
(iii) eliminate the Company's 15,000,000 shares of
Series A Common Stock and increase the number of
shares of Common Stock by a like amount and
eliminate the Company's Series C Preferred Stock.
[A copy of the Amended and Restated Certificate of
Incorporation is attached hereto as Annex [I].]
This Prospectus is furnished to the holders of Common Stock
and Series C Preferred Stock in connection with the solicitation
of proxies by and on behalf of the Board of Directors of the
Company (the "Board") for use at the Special Meeting of holders
of Common Stock and Series C Preferred Stock, scheduled to be
held at [The Peninsula Beverly Hills, 9882 Little Santa Monica
Boulevard, Beverly Hills, California 90212, on [______],
[______], 1996, at [______] a.m.] and at any adjournments
thereof. The approximate date on which this Prospectus and the
accompanying forms of proxy are first being mailed to
stockholders is [______], 1996. The Company's principal
executive offices are located at 15400 Sherman Way, Van Nuys,
California 91406.
Proxies, in the forms enclosed, are being solicited by the
Board for use at the Special Meeting. The persons named as
proxies were selected by the Board and are officers of the
Company or its affiliates. Proxies may be revoked by a
stockholder by written notice (including a properly executed and
later dated proxy) to the Secretary of the Company at any time
prior to the voting. In addition, a stockholder who attends the
Special Meeting may vote his shares personally and revoke his
proxy at that time. All shares represented by valid proxies
received pursuant to this solicitation, and not subsequently
revoked, will be voted as provided on the proxy.
The expense of preparing, printing and mailing this
Prospectus and the proxies solicited hereby will be borne by the
Company. In addition to the use of the mails, proxies may be
solicited by officers, Directors and regular employees of the
Company, without extra remuneration, by personal interviews,
telephone, telegraph or otherwise. The Company will also request
brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares held of record
and will reimburse such persons for their reasonable
out-of-pocket expenses.
The Board has fixed the close of business on [______], 1996
as the record date (the "Record Date") for the determination of
stockholders entitled to receive notice of and to vote at the
Special Meeting. Only stockholders of record at the close of
business on the Record Date will be entitled to notice of and to
vote at the Special Meeting. At the close of business on the
Record Date, the Company had outstanding [2,418,417] shares of
Common Stock and 15,000 shares of Series C Preferred Stock. The
holders of Common Stock and Series C Preferred Stock are entitled
to vote together as a single group on the amendments to the
Company's Restated Certificate of Incorporation. Each share of
Common Stock is entitled to one vote. Each share of Series C
Preferred Stock is currently entitled to [75.34] votes. The
holders of a majority of the shares of Common Stock and Series C
Preferred Stock taken together constitute a quorum for the
meeting.
ACTION TO BE TAKEN UNDER PROXY
All proxies of holders of Common Stock and Series C
Preferred Stock in the accompanying form that are properly
executed and returned will be voted at the meeting and any
adjournments thereof in accordance with any specifications
thereon or, if no specifications are made, will be voted for the
amendments to the Restated Certificate of Incorporation.
All outstanding shares of the Company's Common Stock and
Series C Preferred Stock represented by properly executed and
unrevoked proxies received in the accompanying form in time for
the Special Meeting will be voted. A stockholder may, with
respect to the amendments to the Restated Certificate of
Incorporation and the Exchange Offer and Series C Exchange Offer,
as specified in the Notice of Special Meeting, (i) vote "for"
such matters, (ii) vote "against" such matters or (iii) "abstain"
from voting on such matters. A vote to abstain from voting on
the amendments and the Exchange Offer has the legal effect of a
vote against such matters. Shares will be voted as instructed in
the accompanying proxy. If no instructions are given, the shares
will be voted for the amendments to the Restated Certificate of
Incorporation and for the Exchange Offer.
A proxy submitted by a stockholder may indicate that all or
a portion of the shares represented by such proxy are not being
voted by such stockholder with respect to the amendments or the
Exchange Offer. This could occur, for example, when a broker is
not permitted to vote stock held in street name on certain
matters in the absence of instructions from the beneficial owner
of the stock. The shares subject to any such proxy which are not
being voted with respect to the amendments or the Exchange Offer
(the "non-voted shares") will be considered shares not present
and entitled to vote on such matter, although such shares may be
considered present and entitled to vote for all other purposes
and will count for the purpose of determining the presence of a
quorum. (Shares voted to abstain on a particular matter will not
be considered non-voted shares.) Approval of each matter
specified in the Notice of Special Meeting requires the
affirmative vote of the holders of a majority of the shares of
Common Stock and Series C Preferred Stock, voting together as a
single class, entitled to vote on the matter. Accordingly,
non-voted shares with respect to such matters have the legal effect
of a vote against such matters.
The Board knows of no matters, other than those stated
above, to be presented and considered at the meeting. If,
however, any other matters properly come before the meeting or
any adjournments thereof, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with
their judgment on any such matters. The persons named in the
enclosed proxy may also, if a quorum is not present, vote such
proxy to adjourn the meeting from time to time.
THE APPROVAL OF THE MATTERS SET FORTH ABOVE BY THE HOLDERS
OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK AND
SERIES C PREFERRED STOCK, VOTING TOGETHER AS A SINGLE CLASS, IS
REQUIRED FOR THE CONSUMMATION OF THE EXCHANGE OFFER. THE FAILURE
OF THE COMPANY TO OBTAIN THE COMMON STOCK PROXIES WOULD CAUSE THE
COMPANY TO SEEK ALTERNATIVES OTHER THAN THE EQUITY
RATIONALIZATION.
The holders of Common Stock are not entitled to appraisal
rights in connection with the matters submitted for their
approval.
The Board of Directors of the Company recommends a vote
"FOR" approval of the amendments to the Restated Certificate of
Incorporation of the Company.
Approval of the Exchange Offer, Series C Exchange Offer and
Issuance of Additional Common Stock
The rules of the Nasdaq National Market require stockholder
approval upon the increase in the number of shares of outstanding
common stock under certain circumstances. While it is not clear
that the issuance of Common Stock in connection with the Exchange
Offer and Series C Exchange Offer requires the approval of the
Company's other stockholders, the Company is seeking that
approval as part of approval of the Exchange Offer and Series C
Exchange Offer. Approval by the holders of the Company's Common
Stock and the Series C Preferred C Preferred Stock of the
Exchange Offer and Series C Exchange Offer may result in up to an
additional ________ shares of Common Stock being issued if all of
the Holders of the Outstanding Preferred Stock tender their stock
to the Company in exchange for the Common Stock Consideration and
if the Market Price of the Common Stock is $________ per share.
Amendments to Outstanding Preferred Stock
Approval by the holders of a majority of the outstanding
shares of Common Stock and Series C Preferred Stock of the
Proposed Amendments to the Outstanding Preferred Stock is being
sought. Upon approval by the holders of a majority of the
outstanding shares of Common Stock and Series C Preferred Stock
of those amendments being submitted for their vote and
consummation of the Exchange Offer, the Amended and Restated
Certificate of Incorporation will be filed with the Secretary of
State of the State of Delaware. See "Proposed Amendments to
Outstanding Preferred Stock" for more detail.
Elimination of Series A Common Stock and Series C Preferred Stock
The Company has 24,000,000 shares of Common Stock
authorized, 2,448,267 shares of which were issued as of June 30,
1996, and 15,000,000 shares of Series A Common Stock authorized,
none of which are currently issued. The Series A Common Stock is
identical to the Common Stock except for lower voting rights.
Although no shares of Series A Common Stock are outstanding, the
Series C Preferred Stock may be converted into shares of Series A
Common Stock (instead of a like number of shares of Common
Stock). However, as the Series C Preferred Stock will be
cancelled pursuant to the Series C Exchange Offer if it is
consummated, the Series A Common Stock will then no longer be
necessary. Thus, the Board of Directors has requested approval
for the elimination of the 15,000,000 shares of Series A Common
Stock and the increase of the authorized shares of Common Stock
from 24,000,000 shares to 39,000,000 shares. In addition, once
the Series C Exchange Offer is completed, there will be no need
for the continued authorization of the Series C Preferred Stock
and the Certificate of Designations for such Stock will be
cancelled.
Other Matters
Unless otherwise directed, the persons named in the
accompanying proxy intend to vote all proxies received by them in
favor of the proposed amendments to the Restated Certificate of
Incorporation of the Company.
The Board of Directors does not intend to bring before the
meeting any other matters. No other matters may be brought
before the special meeting.
The cost of soliciting proxies will be borne by the Company.
Proxies may be solicited by personal interview, telephone and
telegraph as well as by use of the mails. It is anticipated that
banks, brokerage houses and other custodians, nominees or
fiduciaries will be requested to forward soliciting material to
their principal and to obtain authorization for the execution of
proxies. Employees of the Company participating in the
solicitation of proxies will not receive any additional
remuneration. The Company estimates that the total cost to the
Company of this proxy solicitation will be approximately
$[____________].
The matters submitted for approval by the holders of Common
Stock and Series C Preferred Stock will not become effective
until such time as the Amended and Restated Certificate of
Incorporation is filed with the Secretary of State of the State
of Delaware. However, once approved by the holders of a majority
of the outstanding shares of Outstanding Preferred Stock Common
Stock and Series C Preferred Stock, the Company will be obligated
to cause the Amended and Restated Certificate of Incorporation to
be so filed.
Proposals of holders of Common Stock intended to be
presented at the next annual meeting of stockholders must be
received by the Company on or prior to [January 20, 1997] in
order to be considered for inclusion in the Company's proxy
statement relating to the 1997 annual meeting.
PRESENT INTENTION OF CERTAIN PERSONS
PIONEER, THE HOLDER OF APPROXIMATELY 50% OF THE COMMON STOCK
AND COMMON STOCK EQUIVALENTS BY VIRTUE OF ITS OWNERSHIP OF
637,844 SHARES OF COMMON STOCK AND ALL OF THE SERIES C PREFERRED
STOCK, HAS INFORMED THE COMPANY THAT IT INTENDS TO VOTE IN FAVOR
OF THE MATTERS SET FORTH ABOVE. ACCORDINGLY, APPROVAL OF THE
MATTERS SUBMITTED TO A VOTE OF THE HOLDERS OF COMMON STOCK AND
SERIES C PREFERRED STOCK IS ANTICIPATED.
EXCHANGE OF SERIES C PREFERRED STOCK BY PIONEER
Pioneer, the holder of 637,844 shares of Common Stock and
all of the issued and outstanding Series C Preferred Stock
(convertible as of September 30, 1996 into 1,172,904 shares of
Common Stock), has agreed, upon the closing of the Exchange
Offer, to convert all of the Series C Preferred Stock it holds
into a combination of Common Stock and cash in the manner
described below.
Pioneer and the Company have agreed that Pioneer will
receive a minimum of [__]% of its total liquidation value as of
September 30, 1996 (such liquidation value is estimated to
approximate $17,857,000 as of such date), and a maximum [__]% of
such liquidation value in a combination of cash and Company
Common Stock in redemption and exchange of its Series C Preferred
Stock. The minimum amount of cash to which Pioneer is entitled
is $____________. To the extent that the Company is not required
to pay to the Holders of Outstanding Common Stock cash in excess
of $____________ as the cash portion of the Cash and Common Stock
Consideration (which may occur if the Holders of a substantial
number of shares of Outstanding Preferred Stock either elect to
receive the Common Stock Consideration, or do not elect to
exchange at all), then, to the extent that the amount remaining
after payment to the Holders of the Outstanding Common Stock
exceeds $____________, the Company has agreed to share 50% of the
excess with Pioneer in redemption of its Series C Preferred
Stock. This will result in a correspondingly lower portion of
the redemption consideration payable in Company Common Stock.
After the cash payment to Pioneer, the remainder of Pioneer's
liquidation preference, as multiplied by the percentage
determined below, will be paid to Pioneer in Common Stock at the
Market Price. The percentage will equal ___% if Pioneer receives
cash consideration at least equal to ___% of its estimated
liquidation value as of September 30, 1996. To the extent that
Pioneer has not received cash equal to ___% of such liquidation
value, then the percentage will be increased by one-half of one
percent for each one-percent less than ___%. The Company has
included the Common Stock to be received by Pioneer in the
Registration Statement on Form S-4, which includes this
Prospectus.
In addition to this agreement between the Company and
Pioneer, Pioneer and the Company are negotiating two additional
agreements involving the Company's motion picture productions and
film library.
DESCRIPTION OF THE NEW NOTES
The Company is seeking to replace the Outstanding Notes with
a new series of Senior Subordinated Notes due 2003 and
Convertible Subordinated Notes due 2005 in an aggregate principal
amount of $50 million. The Senior Subordinated Notes may include
warrants to purchase Common Stock. The terms of the Senior
Subordinated Notes and Convertible Subordinated Notes are yet to
be finally determined. Issuing $50 million of New Notes is a
condition to closing the Exchange Offer. This Prospectus will be
supplemented as the terms of the New Notes are determined.
DESCRIPTION OF THE NEW LIVE CREDIT FACILITY
The Company is also seeking a four-year revolving credit
facility of $50 million in the form of the New LIVE Credit
Facility from one or more financial institutions. The New LIVE
Credit Facility will replace the Existing LIVE Credit Facility of
$30 million due in 1997, and is expected to have more favorable
financial terms. Consummation of the New LIVE Credit Facility is
a condition to closing the Exchange Offer. This Prospectus will
be supplemented as the terms of the New LIVE Credit Facility are
determined.
THE COMPANY
LIVE Entertainment Inc., a Delaware corporation, was formed
in 1988. Its largest ongoing businesses are LFM and LI, which
primarily acquire rights to produce and distribute theatrical
motion pictures, children's films and special interest programs
which they market and distribute in all media to wholesalers,
retailers and consumers in the United States and internationally.
The Company's operations are primarily in a single business
segment, the worldwide distribution and sale of a broad variety
of film related entertainment software products.
The Company's executive offices are located at 15400 Sherman
Way, Suite 500, Van Nuys, California 91406 and its telephone
number is (818) 988-5060.
CAPITALIZATION
The following unaudited table sets forth the capitalization
of the Company at June 30, 1996. The actual capitalization has
been adjusted to give effect to the assumed exchange of [___]% of
the Outstanding Preferred Stock for $[______] of cash and
[_______] shares of newly issued Common Stock (assuming 50%
acceptance of the Common Stock Consideration and 50% acceptance
of the Cash and Common Stock Consideration and a Market Price for
Company Common Stock of $_________) and replacement of all the
Outstanding Notes with $50 million in principal amount of New
Notes ("As Adjusted").
As
As Further
Actual Adjusted Adjusted
(Amounts in thousands)
DEBT
Outstanding Notes (including accrued
interest of $______________). . . . . . . . $51,340 $ -- $ --
Bank debt. . . . . . . . . . . . . . . . . . . -- xx,xxx x,xxx
New Notes. . . . . . . . . . . . . . . . . . .
Distribution agreement advances. . . . . . . . 6,666 x,xxx x,xxx
Notes payable. . . . . . . . . . . . . . . . . -- xxx xxx
New LIVE Credit Facility . . . . . . . . . . .
Dividends Payable. . . . . . . . . . . . . . . 3,570 xx xx
TOTAL DEBT. . . . . . . . . . . . . . . . . 61,576 xx,xxx xx,xxx
STOCKHOLDERS' EQUITY
Outstanding Preferred Stock. . . . . . . . . . 3,819 xx xx
Series C Preferred Stock . . . . . . 15 xx
Common Stock . . . . . . . . . . . . . . . . . 24 xxx xxx
Warrants . . . . . . . . . . . . . . . . . . . -- xxx xxx
Additional paid-in capital . . . . . . . . . . 126,144 xxx,xxx xxx,xxx
Retained deficit . . . . . . . . . . . . . . . (93,174) (xx,xxx) (xx,xxx)
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . 36,828 xx,xxx xxx,xxx
TOTAL CAPITALIZATION . . . . . . . . . . . $ 98,404 $xxx,xxx $xxx,xxx
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data and
other operating information of the Company. The selected
financial data in the table for the five years ended December 31,
1995, are derived from the audited consolidated financial
statements of the Company. The selected financial data for the
six month periods ended June 30, 1995 and 1996 are derived from
unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of
operations for these periods. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the entire year ending December
31, 1996. The data should be read in conjunction with the
consolidated financial statements, related notes and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<PAGE>
<TABLE>
<CAPTION> Six Months Ended
Year Ended December 31, June 30,
1991 1992 1993 1994 1995 1995 1996
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations (a)
Net sales. . . . . . . . $237,705 $160,953 $143,735 $117,205 $140,112 $66,961 $72,822
Operating (loss) profit. (586) (4,854) (21,177) (6,174) 10,826 6,297 3,114
Interest expense, net. . (15,834) (14,424) (6,264) (3,300) 565 266 500
Income (loss) from
continuing operations. . (17,737) (17,460) (28,209) (9,674) 10,791 5,963 2,710
Income (loss) from
discontinued operations. (89,315) 1,090 (22,083) (100) -- -- --
Net income (loss). . . . (107,052) (12,403) (50,292) (9,774) 10,791 5,963 2,710
Income (loss) per
common share:
Primary:
Continuing operations. (7.75)(b) (8.20)(b) (13.15)(b) (8.05)(b) 1.34(b) .64(b) .39
Net income . . . . . (44.75)(b) (6.10)(b) (22.30)(b) (8.09)(b) 1.34(b) .64(b) .39
Fully diluted:
Continuing operations. . (7.75)(b) (8.20)(b) (13.15)(b) (8.05)(b) .53(b) .41(b) .25
Net income . . . . . (44.75)(b) (6.10)(b) (22.30)(b) (8.09)(b) .53(b) .41(b) .25
EBITDA . . . . . . .
</TABLE>
<TABLE>
<CAPTION> December 31, June 30,
1991 1992 1993 1994 1995 1996
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Cash and receivables . . . . . $97,597 $33,183 $44,790 $26,214 $49,487 $25,019
Inventories. . . . . . . . . . 49,205 48,961 10,124 7,842 4,813 5,890
Total assets . . . . . . . . . 413,977 297,048 253,549 156,794 149,445 137,244
Total obligations. . . . . . . 352,380 207,989 242,807 121,077 111,425 100,416
Total stockholders' equity . . 61,597 89,059 10,742 35,717 38,020 36,828
Selected Financial Data and Ratios
Book value per common share(c) . . . x.xx xx.xx xx.xx xx.xx x.xx x.xx
Pro forma book value per common
share(c) . . . . . . . . . . x.xx
Operating (loss) profit margin . . . n/a xx.xx% xx.xx% xx.xx% (x.xx%) x.xx%
Ratio of total debt to
stockholders' equity . . . . x.xxx x.xxx x.xxx x.xxx x.xxx x.xxx
Ratio of earnings to fixed charges (d) . n/a x.xxx x.xxx x.xxx x.xxx(f) x.xxx(g)
Pro forma ratio of earnings to
fixed charges (e). . . . . . x.xxx(f) x.xxx(g)
Ratio of earnings to fixed charges and
preferred stock dividends (d). . . n/a x.xxx x.xxx x.xxx x.xxx(f) x.xxx(g)
Pro forma ratio of earnings to
fixed charges and preferred stock
dividends (e). . . . . . . . x.xxx(f) x.xxx(g)
<FN>
Footnotes to Selected Financial Data
(a) Net sales do not include sales of VCL of $26,713,000,
$31,560,000, $28,511,000, $22,712,000 and $32,527,000 for
the years ended December 31, 1991, 1992, 1993, 1994 and
1995, respectively. Net sales do not include sales of
VCL of 18,225,000 for the six months ended June 30, 1995.
(b) Income (loss) per common share in 1991, 1992, 1993, 1994
and 1995 is net of preferred dividends of $966,000,
$2,397,000, $3,589,000, $3,791,000 and $3,027,000,
respectively, and, for 1994 and 1995, is also net of
accretion in the redemption value of the Outstanding
Preferred Stock of $6,000,000 and $4,509,000,
respectively. Income per common share for the six months
ended June 30, 1995 and 1996 is net of preferred
dividends of $1,575,000 and $1,683,000, respectively,
and, for the six months ended June 30, 1995 is net of
accretion in the redemption value of the Outstanding
Preferred Stock of $2,830,000.
(c) The book value per common share is computed by dividing
the Company's stockholders' equity balance at the end of
the period by the total number of shares of Common Stock
outstanding at the end of the period. For years prior to
_____, Common Stock outstanding has been adjusted for the
____________ 5:1 reverse stock split. The pro forma book
value per common share gives effect to the assumed
exchange of ___% of the Outstanding Preferred Stock for
______________________________ as if these transactions
had occurred as of June 30, 1996. The pro forma number
of common shares reflects the conversion of the Exchange
Preferred Stock assuming 50% acceptance of the Common
Stock Consideration and 50% acceptance of the Cash and
Common Stock Consideration.
(d) The ratio of earnings to fixed charges is computed by
dividing the Company's fixed charges (interest expense
including capitalized interest and the portion of rental
expense which is deemed to be representative of the
interest factor) into earnings from continuing operations
before income taxes plus fixed charges (excluding
capitalized interest). The ratio of earnings to fixed
charges and preferred stock dividends is computed in the
same manner with an adjustment to fixed charges and
earnings for the inclusion of the preferred stock
dividend requirement.
(e) The pro forma ratio of earnings to fixed charges and the
pro forma ratio of earnings to fixed charges and
preferred stock dividends gives effect to the assumed
exchange of ___% of the Outstanding Preferred Stock
assuming 50% acceptance of the Common Stock Consideration
and 50% acceptance of the Cash and Common Stock
Consideration and
as if these transactions had occurred as of the beginning
of the periods presented, or at a later date if issued
after the beginning of the period.
(f) A ratio of less than 1.00x indicates that earnings are
not sufficient to cover fixed charges, or fixed charges
and preferred stock dividends. For the year ended
December 31, 1995, fixed charges, on a historical and pro
forma basis, exceeded earnings by $____________ and
$_____________ respectively. Further, fixed charges and
the preferred stock dividend requirement, on a historical
and pro forma basis, exceeded earnings by $_____________
and $_____________ respectively.
(g) A ratio of less than 1.00x indicates that earnings are
not sufficient to cover fixed charges, or fixed charges
and preferred stock dividends. For the six months ended
June 30, 1996, fixed charges, on a historical and pro
forma basis, exceeded earnings by $____________ and
$____________ respectively. Further, for the six months
ended June 30, 1995, fixed charges and preferred stock
dividends, on a historical and pro forma basis, exceeded
earnings by $__________ and $___________ respectively.
</FN>
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1996 Compared to Three Months
Ended June 30, 1995
Continuing Operations
Net sales of the Company increased to $50,269,000 during 1996
compared to $22,456,000 during 1995. The increase of $27,813,000,
or 124%, is primarily attributable to theatrical releases of The
Substitute and The Arrival and increases in international and
television sales in the second quarter of 1996 as compared to the
second quarter 1995. In addition, the second quarter of 1996
contained the video rental release of Cutthroat Island, for which
there was no comparable title released in the second quarter of
1995.
Gross profits of the Company increased $2,217,000, or 43.7%,
to $7,294,000 during 1996 compared to $5,077,000 during 1995. The
increase in gross profit dollars was primarily related to the
increase in sales. As a percentage of sales, gross profit
decreased to 14.5% during 1996 from 22.6% during 1995. The
decrease in gross profit as a percentage of sales is primarily the
result of substantial print and advertising expenditures
outweighing anticipated theatrical revenues from the Company's 1996
theatrical releases.
Selling, general and administrative expenses of the Company
increased $1,036,000, or 32.8%, to $4,196,000 during 1996 compared
to $3,160,000 during 1995. As a percentage of sales, the amount
decreased to 8.3% during 1996 from 14.1% during 1995. The dollar
increase is primarily a result of the recovery of a previously
written-off bad debt from a former distributor included in the
second quarter of 1995. The percentage decrease is primarily due
to the increase in sales.
Interest and other income decreased $93,000 or 15.1% to
$523,000 during 1996 compared to $616,000 during 1995. This
decrease was primarily the result of lower interest earned on
smaller cash balances in the second quarter of 1996 compared to the
second quarter of 1995.
Interest expense of the Company decreased $78,000, or 19.8%,
to $315,000 during 1996 compared to $393,000 during 1995.
Preferred dividends of $984,000 in 1996 and $716,000 in 1995
represents the 5% cash dividend accrued on the Outstanding
Preferred Stock through May 1996, with 10% being accrued
thereafter, and the 5% cash dividend accrued on the Series C
Preferred Stock, as well as, in the case of the Series C Preferred
Stock, additional 5% dividends on accrued but unpaid dividends.
Six Months Ended June 30, 1996 Compared to Six Months
Ended June 30, 1995
Continuing Operations
Net sales of LIVE increased to $72,822,000 during 1996
compared to $66,961,000 during 1995. The increase of $5,861,000,
or 8.8%, is primarily attributable to theatrical releases of The
Substitute and The Arrival and increases in international and
television sales in 1996. The increase in revenue was offset by
decreased rental sales in 1996 which is attributable to the
successful video rental release of Stargate in 1995, for which
there was no comparable video title released in 1996.
Gross profits of the Company decreased $1,892,000, or 12.6%,
to $13,134,000 during 1996 compared to $15,026,000 during 1995. As
a percentage of sales, gross profit decreased to 18.0% during 1996
from 22.4% during 1995. The decrease in both gross profit dollars
and as a percentage of sales is primarily the result of substantial
print and advertising expenditures [outweighing anticipated
theatrical revenues] from the Company's 1996 theatrical releases.
Selling, general and administrative expenses of the Company
increased $1,291,000, or 19.1%, to $8,058,000 during 1996 compared
to $6,767,000 during 1995. As a percentage of sales, the amount
increased to 11.1% during 1996 from 10.1% during 1995. The dollar
increase and percentage increase is primarily a result of the
recovery of a previously written-off bad debt from a former
distributor included in the second quarter of 1995.
Interest and other income increased $220,000 or 20.1% to
$1,312,000 during 1996 compared to $1,092,000 during 1995, which
was primarily the result of interest earned on higher cash balances
on-hand during the first quarter of 1996.
Interest expense of LIVE decreased $14,000, or 1.7%, to
$812,000 during 1996 compared to $826,000 during 1995.
Preferred dividends of $1,683,000 in 1996 and $1,575,000 in
1995 represent the 5% cash dividend accrued on the Outstanding
Preferred Stock through May of 1996, with 10% being accrued
thereafter, and the 5% cash dividend accrued on the Series C
Preferred Stock, as well as, in the case of the Series C Preferred
Stock, additional 5% dividends on accrued but unpaid dividends.
Year Ended December 31, 1995 Compared to Year Ended December
31, 1994
Continuing Operations
Net sales of the Company increased to $140,112,000 during 1995
compared to $117,205,000 during 1994. The increase of $22,907,000,
or 19.5%, is primarily attributable to a stronger video rental
release schedule and increased sell-through sales in 1995. This
included increased sales on such sell-through promotions as a
Terminator package and the seasonal Christmas product, and also the
successful rental and sell-through release of Stargate (which
accounted for approximately 25% of the Company's net sales for the
year), for which there was no comparable title released in 1994.
The Company's home video division released 24 rental titles during
1995 compared to 23 rental titles in 1994. The increase in revenue
is also attributable to increased theatrical, television and
international revenues in 1995.
Gross profits of the Company increased $11,663,000, or 75.6%,
to $27,087,000 during 1995 compared to $15,424,000 during 1994.
The increase in gross profit dollars was primarily related to the
increase in rental and sell-through sales noted above. As a
percentage of sales, gross profit increased to 19.3% during 1995
from 13.2% during 1994, primarily due to higher sales and margins
generated in 1995 primarily from the release of Stargate and
certain sell-through promotions.
Selling, general and administrative expenses of the Company
decreased $2,424,000, or 13.7%, to $15,249,000 during 1995 compared
to $17,673,000 during 1994. As a percentage of sales, the amount
decreased to 10.9% during 1995 from 15.1% during 1994. The dollar
and percentage decrease is primarily a result of the Company
recording a reserve in 1994 of approximately $1,560,000 against a
receivable owed to the Company by Carolco and the recovery of a
previously written off bad debt from a former distributor of
approximately $1 million in 1995.
Interest and other income decreased $268,000 or 10.0% to
$2,424,000 during 1995 compared to $2,692,000 during 1994, which
was primarily the result of a decrease in interest earned on cash
on hand and letters of credit issued to secure film acquisitions in
1994.
Interest expense of the Company decreased $4,133,000, or
69.0%, to $1,859,000 during 1995 compared to $5,992,000 during
1994. Interest expense decreased as a result of the repayment of
$37 million of 12% Subordinated Secured Notes due 1994 (the "12%
Notes") during September and October of 1994 and a decrease in the
amortization of loan costs in 1995.
Preferred dividends of $3,027,000 in 1995 and $3,791,000 in
1994 represent the 5% cash dividend accrued on both the Outstanding
Preferred Stock and the Series C Preferred Stock, as well as, in
the case of the Series C Preferred Stock, additional 5% dividends
on accrued but unpaid dividends.
The effective income tax rate for 1995 was 5.3% compared to an
effective tax rate of 2.1% for 1994, primarily due to the Company
having income from continuing operations of $11,391,000 (1995) as
compared to a loss from continuing operations of $9,474,000 (1994).
Discontinued Operations
As a result of the Board of Directors' decision to dispose of
the Company's interests in VCL, the results of operations for VCL
have been restated to account for the sale of VCL as a disposal of
a portion of a line of business. Accordingly, a provision for
losses during the phase-out period totaling $3,885,000 for VCL had
been accrued and accounted for at December 31, 1993 and was not
included in the results of operations for 1994 and 1995. In
November 1995, the Company and certain of its affiliates, on the
one hand, and Datty Ruth, the owner of 19% of VCL, and Apricot
Computer GmbH (Apricot), on the other, consummated a transaction
whereby the Company's 81% interest in VCL, as well as all
receivables owed by VCL to the Company or its affiliates, was
transferred to Ruth and Apricot. The total consideration received
by the Company and its affiliates in connection with such
transaction was approximately $7,444,000, of which approximately
$3,100,000 was received in February 1995. The remaining $4,344,000
was received in November 1995. The Company reflected a gain of
approximately $2,913,000 in the quarter ended September 30, 1995,
resulting from the completion of this transaction.
Net sales of VCL increased to $32,257,000 during 1995 compared
to $22,712,000 during 1994. The increase of $9,545,000, or 42.0%,
was due primarily to a stronger release schedule in 1995. For the
year ended December 31, 1994, net revenues, operating profits and
identifiable assets relating to foreign operations were
$26,629,000, $2,945,000 and $33,262,000, respectively. At December
31, 1994 the assets of VCL have been included in "Assets Held For
Sale." For the years ended December 31, 1994 and 1995, net
revenues and operating profits relating to foreign operations were
$32,257,000 and $8,775,000 respectively.
Year Ended December 31, 1994 Compared to Year Ended December
31, 1993
Continuing Operations
Net sales of the Company decreased to $117,205,000 during 1994
compared to $143,735,000 during 1993. The decrease of $26,530,000,
or 18.5%, is primarily attributable to a weaker release schedule in
1994 compared to 1993, as fewer titles were purchased for release
in 1994 due to the Company's liquidity problems and the lack of
commercially attractive titles. The Company released twenty-three
rental titles during 1994 compared to thirty-three rental titles
during 1993. Results for 1994 included revenues from the initial
rental release of the films Fortress, The Piano, Gunmen, The House
of the Spirits, Beyond The Law and Wagons East. There was also a
decrease in sell-through sales during 1994 compared to 1993,
primarily due to the sell-through release of Tom & Jerry: The Movie
in 1993. There was no comparable sell-through title released in
1994.
Gross profits of LIVE decreased $3,975,000, or 20.5%, to
$15,424,000 during 1994 compared to $19,399,000 during 1993. The
decrease in gross profit dollars was primarily related to the
decrease in sales and an increase in amortization of film rights
costs related to adjustments in projected values of certain film
properties. As a percentage of sales, gross profit decreased from
13.5% during 1993 to 13.2% during 1994. The decrease in gross
profit as a percentage of sales is primarily due to the decrease in
rental sales, which usually generate higher gross profits as a
percentage of sales.
Selling, general and administrative expenses of the Company
increased $425,000, or 2.5%, to $17,673,000 during 1994 compared to
$17,248,000 during 1993. As a percentage of sales, the amount
increased from 12.0% during 1993 to 15.1% during 1994. The dollar
increase is primarily a result of the write-off of the entire
$6,211,000 receivable owed to the Company by Carolco (of which all
but $2,177,000 was reserved for in prior years) and approximately
$1 million in expenses related to a proposed merger between Carolco
and the Company, offset by reduced overhead expenses. The
percentage increase is primarily due to the decrease in sales.
Interest income of the Company increased $1,258,000, or 87.7%,
to $2,692,000 during 1994 compared to $1,434,000 during 1993. The
increase is primarily due to increased cash on hand throughout
1994.
Interest expense of the Company decreased $1,706,000, or
22.2%, to $5,992,000 during 1994 compared to $7,698,000 during
1993. Interest to maturity on $36,872,000 of the Company's $40
million of Outstanding Notes has been included in the carrying
value of the Outstanding Notes and will not be recognized as
interest expense in 1994 and future years. Interest expense
recognized in 1993 and 1994 on the remaining $3,128,000 of
Outstanding Notes was $312,000 and $476,000, respectively. The
decrease in interest expense in 1994 was primarily due to reduced
bank borrowings in 1994.
Preferred dividends of $3,589,000 and $3,791,000 in 1993 and
1994 represents the 5% cash dividend accrued on both the
Outstanding Preferred Stock and the Series C Preferred Stock as
well as, in the case of the Series C Preferred Stock, additional 5%
dividends on accrued but unpaid dividends.
The effective income tax rate from continuing operations for
1994 was 2.1%. The effective tax rate from continuing operations
for 1993 was 2.8%.
Revenues, operating profits/(losses) and identifiable assets
of the Company's foreign operations were $26,629,000, $2,945,000
and $33,262,000, respectively, in 1994 compared to $34,009,000,
($3,289,000) and $28,871,000, respectively, in 1993.
Discontinued Operations
As a result of the Board of Directors' decision in early 1994
to dispose of LIVE's interests in the "Specialty Retail Division"
consisting of Strawberries Inc. and Strawberries Inc.'s wholly
owned subsidiary Waxie Maxie's Quality Music Co. ("Specialty Retail
Division") and VCL, the Specialty Retail Division's results of
operations for 1993 had been restated and accounted for as a
discontinued operation. VCL's operating results for 1993 and 1994
had been restated and accounted for as a disposal of a portion of
a line of business. Accordingly, the provision for losses during
the phase-out period totaling $2,024,000 for the Specialty Retail
Division and $3,885,000 for VCL had been accrued and accounted for
at December 31, 1993 and are not included in the results of
operations for 1994. Losses of $1,858,000 and $2,994,000 have been
charged against the respective provisions during 1994.
Liquidity and Capital Resources
Historically, the Company has funded its operations through a
combination of cash generated from operations, bank borrowings,
advances from distributors under distribution agreements and the
proceeds from the issuance of debt instruments. For the six months
ending June 30, 1996, the Company generated negative cash flow from
operations of $27,550,000 primarily due to increases in accounts
receivable and film costs associated with the release of The
Substitute and The Arrival.
On May 27, 1995, LIVE entered into a three year extension of
its distribution agreement with Warner-Elektra-Atlantic Corporation
("WEA"). Under the terms of the agreement, WEA advanced $10
million to LIVE, recoupable from distribution revenues during the
three year term of the agreement at $277,778 per month, plus
interest at LIBOR, plus 0.2%. In order to obtain the advance, LIVE
granted WEA a second priority security interest in substantially
all of LIVE's assets. As of June 30, 1996, there was $6,666,000
outstanding under the advance, and the interest rate on the advance
at June 30, 1996 was 5.7%. The Company is negotiating an amendment
to this agreement which is expected to provide another $10 million
advance in September 1996.
Investing activities generated a negative cash flow of
$116,000 during the six months ended June 30, 1996, primarily as a
result of the acquisition of property and equipment at LIVE.
LIVE and its affiliates are party to the Existing Credit
Facility, a three-year $30 million revolving credit facility with
Foothill Capital Corporation. Borrowings available under the
Existing Credit Facility are limited to $27,500,000 until
additional participant lenders are added to the Facility, at which
time the borrowings available will be increased to a maximum $30
million. Borrowings under the Existing Credit Facility are secured
by substantially all of the assets of LIVE and its affiliates.
Outstanding borrowings under the Existing Credit Facility bear
interest at the rate of 2% per annum above the highest of the Bank
of America, Mellon Bank or Citibank prime rate, payable monthly.
In no event will interest under the Existing Credit Facility be
less than 7% per annum. The Existing Credit Facility provided for
a closing fee of $500,000, an annual facility fee of 1/4 of 1% and
a commitment fee of 1/4 of 1% on any unused amount. The Existing
Credit Facility also requires LIVE to meet certain financial
ratios, and as of June 30, 1996 the Company was in compliance with
all such financial ratios. There were no amounts outstanding under
the Existing Credit Facility as of June 30, 1996.
The Company has not borrowed any funds under the Existing
Credit Facility since it was obtained in November 1994, and, as
noted, the Company has had substantial cash balances throughout the
1995 fiscal year and through June of 1996. As a result of the
Company's upcoming cash expenditures relating to theatrical
releases and production/acquisition schedules for 1996, it is
anticipated that the cash balances on hand will be utilized and the
Company will have to draw funds under the Existing Credit Facility
to meet its anticipated 1996 cash expenditures. This will reduce
the liquidity of the Company in 1996 when compared to the 1995 cash
and borrowing positions.
Dividends on the Series C Preferred Stock, at the rate of 5%
per annum on the unreturned $15 million liquidation value of the
Series C Preferred Stock, are due on June 30 and December 31 of
each year. Although the dividends scheduled to be paid on June 30
and December 31 of 1993, 1994, 1995 and June 30, 1996 were accrued
by LIVE, those dividends were not paid due to restrictions imposed
on LIVE by the terms of the Outstanding Preferred Stock, which
prohibit the payment of dividends on the Series C Preferred Stock
unless the aggregate amount of such dividends, together with all
cash dividends paid on the Outstanding Preferred Stock, does not
exceed the net income of LIVE (adding back specified net worth
exclusions) since the March 23, 1993 date of issuance of the
Outstanding Preferred Stock and Series C Preferred Stock. LIVE has
had a cumulative consolidated net loss for the period subsequent to
March 23, 1993. Thus, pursuant to the terms of the Outstanding
Preferred Stock, LIVE was prohibited from paying the June 30 and
December 31, 1993, 1994, 1995 and June 30, 1996 cash dividends on
the Series C Preferred Stock which, together with accrued and
unpaid dividends thereon, totaled $2,637,000 as of June 30, 1996.
The unpaid Series C Preferred Stock dividend itself bears a
dividend of 5% per annum, and is due on the next regularly
scheduled dividend payment date for the Series C Preferred Stock.
LIVE does not intend to pay the unpaid dividends, plus the
additional dividends thereon, and will rather exchange the Series
C Preferred Stock for cash and Common Stock as part of the Series
C Exchange Offer.
LIVE experienced negative cash flows from financing activities
of $6,152,000 during the six months ended June 30, 1996 primarily
due to the open market repurchase of 377,500 shares of the
Company's Outstanding Preferred Stock, interest and principal
payments on long term obligations and payment of dividends on the
Outstanding Preferred Stock.
As of June 30, 1996, the aggregate redemption price for the
Outstanding Preferred Stock was $38,198,000 ($10.00 per share).
Although the Company had no obligation to redeem any
Outstanding Preferred Stock, subject to the availability of funds
and the prior approval of its Board of Directors and its lenders,
LIVE acquired shares of its Outstanding Preferred Stock from time
to time, through private purchases or through open market
purchases. Through June 30, 1996, LIVE acquired, and subsequently
retired, a total of 2,177,500 shares of the Outstanding Preferred
Stock at an average price of approximately $4.27 per share.
Impact of Inflation and Other Matters
The inflation rate in recent years has been negligible. Where
manufacturers have increased prices, the Company generally has been
able to pass on such price increases within 90 to 180 days. As a
result, inflation has not had a material impact on the results of
operations.
LIVE ENTERTAINMENT
1996 - 1998 FINANCIAL FORECASTS
General Assumptions
The following information is presented to provide an outline
of the major assumptions used in preparing the 1996 through 1998
fiscal year financial forecasts. Such assumptions are based upon
historical experience of the Company and anticipated future events.
The financial forecasts represent management's best estimate of
future results, but are by their nature uncertain and subject to
factors beyond the Company's control. The Company's independent
auditors have not examined, compiled or applied agreed-upon
procedures to these financial forecasts and, accordingly, accept
no responsibility for them. The Company has no intention
of updating the financial forecasts following the commencement of
the Solicitation or anytime thereafter. See "Rick Factors-Forward
Looking Statements."
Revenues and Costs of Sales
- - The 1996 to 1998 fiscal year revenues and related costs of
sales are based on specific title-by-title analysis of the
indicated number of releases as follows:
1996 1997 1998
Theatrical 5 8 11
Direct to Video 19 17 14
The theatrical releases will be distributed by Orion Pictures
Corp. ("Orion") in 1996.
- - In accordance with the Company's business strategy, film
rights other than those for domestic home video are being
acquired. As a result, there are certain theatrical,
international and television rights reflected in the revenue
and costs assumptions. In general, revenues are recognized
when the films are made available to consumers in the various
media as follows:
Motion Picture Theaters Upon U.S. theatrical release
International 1-12 months after theatrical release
Home Video 4-6 months after theatrical release
Residential Pay-Per View TV 4-6 months after theatrical release
Pay Television 6 months after video release
Free Television 15-18 months after pay television
- - Rights costs, including overages, participation and residuals,
along with theatrical prints and advertising expenditures are
amortized against video, theatrical, television and
international revenues. All such costs are amortized in full
over the periods the revenues are recognized in accordance
with the film forecast method of FAS #53.
- - Video revenue return reserves are based on the following
percentages:
Rental New Release 10.0%
Sell-thru New Release 20.0%
Sell-thru Seasonal Product 30.0%
Sell-thru Special Interest 23.0%
Sell-thru Catalog 20.0%
Avid 22.5%
Operating Expenses
- - Operating expenses for 1996, excluding the 1995 income effect
of the sale of VCL, reflect a 17.8% increase over 1995
operating expenses. The expenses for 1997 include an increase
of approximately $1,100,000 related to the addition of an
in-house sales staff that will replace the staff of WEA and the
Company's distribution of home video products. Operating Expenses
in 1998 reflects a 5% increase over the initial 1997 forecast.
Income Taxes
- - 1996-1988 Income Taxes are calculated at rates approximating 17-30%
and based on net income before taxes. This is a significantly
higher rate than in the past due to LIVE's utilization of its
Alternative Minimum Tax ("AMT") net operating losses.
Film Right Payments
- - It is the Company's goal to acquire future films and rights
without making advance payments and to pay 100% upon delivery;
however the forecasts assume the Company will be able to defer
payment of 70% of the cost of projected releases until
delivery. To project this impact the Company has assumed that
30% of all acquisitions will be paid on execution and the
remaining 70% will be paid on delivery. The forecasts for
1997 and 1998 assumes that two productions in each year will
be financed through co-production arrangements pursuant to
which the Company will fund approximately 40% of the
production budgets.
Distribution
- - The current estimate assumes continuation of the current
agreement with WEA in a reduced form. The Company received an
advance of $10 million in June 1995 and expects to receive an
additional $10 million advance in September 1996. The existing
WEA agency fee is reflected through 1996, however beginning in
1997 it is assumed that, with the Company bringing the sales
function in-house and the fulfillment and billing/collection
functions remaining at WEA, the current fee will be reduced by
at least 2%.
Cash Receipts
- - Collections on sales are generally forecasted to be as
follows:
Video Month following sale
Theatrical Five months following release
Television Month of availability
International Projected based upon assumed availability
in various territories
Cash Disbursements
- - Video duplication and marketing costs are forecasted to be
paid in the quarter the related revenue is recognized. Agency
fees are forecasted to be paid in the month following the sale
from which the fees are earned.
- - Theatrical, television and international costs are forecasted
to be paid in the quarter the related revenues are recognized.
- - Video rights acquisition costs are forecasted to be paid two
quarters prior to video release.
- - Residuals and participations are forecasted to be paid in the
month following the sale from which they are earned.
- - Operating expenses, interest on the current credit facility
and taxes are forecasted to be paid during the period they are
expensed. Interest is paid in March and September on the $40
million Outstanding Notes until their anticipated repayment in
October 1996. Interest is assumed to be paid quarterly on the
new $50 million New Notes and monthly on the New LIVE Credit
Facility.
- - Dividends on Series C Preferred Stock are being recorded
through September 1996, at which time they are extinguished as
part of the Equity Rationalization.
Financial Forecasts ($000)
1996 Estimate 1997 Plan 1998 Plan
$ % $ % $ %
REVENUES (net):
Theatrical $14,802 9.0% $ 50,680 20.9% $49,160 14.9%
Non-theatrical 555 0.3% 2,579 1.1% 2,201 0.7%
International 25,298 15.4% 42,614 17.6% 64,702 19.6%
Television 6,395 3.9% 16,560 6.8% 22,640 6.8%
Video:
Rental 62,841 38.1% 63,721 26.3% 108,241 32.7%
Sellthru 52,601 32.0% 62,872 26.0% 76,788 23.2%
Total Video Revenue 115,442 70.1% 126,593 52.3% 185,029 55.9%
Interactive 2 0.0% 0 0.0% 0 0.0%
Digital Video Disc (DVD) 0 0.0% 1,128 0.5% 1,992 0.6%
Sublicense 2,122 1.3% 1,900 0.8% 5,000 1.5%
Total Net Revenue 164,616 100% 242,054 100% 330,724 100%
COST OF SALES 90,733 55.1% 119,730 49.5% 147,823 44.7%
FILM RIGHT AMORTIZATION 45,699 27.8% 70,092 28.9% 113,512 34.3%
Gross Profit 28,184 17.1% 52,232 21.6% 69,389 21.0%
OPERATING EXPENSES 17,171 10.4% 21,893 9.0% 23,623 7.1%
AMORTIZATION OF GOODWILL 3,924 2.4% 3,924 1.7% 3,924 1.2%
Income from Operations $ 7,089 4.3% $ 26,415 10.9% $ 41,842 12.7%
Net Income $ 4,509 2.7% $ 12,455 5.1% $ 22,591 6.8%
EBITDA $11,692 7.1% $ 17,068 7.1% $ 46,455 14.1%
BUSINESS
Recent Developments for the Company
Bankruptcy of Carolco
On November 10, 1995, Carolco filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code. Carolco had
been a significant supplier of A+ motion picture product to the
Company, including the video rights to such hits as Terminator
II, Basic Instinct, Total Recall and the Rambo series. The last
motion picture provided to the Company by Carolco or its
affiliates is Cutthroat Island, which was released on home video
in April 1996. Because of the Carolco bankruptcy and the fact
that the output agreement between the Company and Carolco
expired in 1995 in any event, the Company does not expect to
receive any additional films from Carolco in the future.
Carolco has sold its film library and certain related
assets to Canal+ D.A. In connection with the sale, the Company
and Carolco have stipulated that certain contracts between the
Company and Carolco relating to the distribution by the Company
of the video rights to films produced by Carolco, and the
distribution by Carolco in foreign territories of films owned by
the Company, would be assumed by Canal+ D.A. after the library
sale is completed. Portions of the distribution agreements
between the Company and Carolco pertaining to the Company's
right to remakes and sequel rights to films in the Carolco
library, however, were severed from the distribution portions of
the agreements and were rejected by Carolco. This has left the
Company with a damage claim in the Carolco bankruptcy, the value
of which cannot be reasonably estimated at this point in time.
Disposal of VCL
As part of its international activities, the Company owned
an 81% interest in VCL, a home video distribution and marketing
company headquartered in Munich, Germany. VCL's year end is
November 30.
In March 1994, primarily as a result of a desire of the
Company to focus its efforts on its core entertainment business,
the Board of Directors of the Company decided to dispose of the
Company's interest in VCL. Accordingly, the Company's interest
in VCL was recorded as "Assets Held For Sale" and "Liabilities
Related To Assets Held For Sale" as of December 31, 1993 and
1994 and was written down to its estimated net realizable or
liquidation value. The operating statements presented were
restated to separately disclose the results of operations of VCL
as a disposal of a portion of a line of business.
In February 1995, the Company and certain of its
affiliates, on the one hand, and Datty Ruth ("Ruth"), the owner
of 19% of VCL, and Apricot Computer GmbH ("Apricot"), on the
other, entered into a preliminary agreement whereby the
Company's 81% interest in VCL, as well as all receivables owed
by VCL to the Company or its affiliates, would be transferred to
Ruth and Apricot. The total consideration received by the
Company and its affiliates in connection with such transaction
was approximately $7,444,000, of which approximately $3,100,000
was received in February 1995. The remaining $4,344,000 was
received in November 1995, and a gain of approximately
$2,913,000 was reflected in the quarter ended September 30,
1995, resulting from the completion of this transaction.
Pioneer Agreements
On February 8, 1996, the Company and Pioneer LDC, Inc.
("PLDC") entered into an Output Deal Agreement (the "Pioneer
Output Agreement") for the distribution of the Company's
theatrical productions in Japan. The three year agreement
includes all theatrical films that the Company produces and
acquires over the period, excluding the Company's two recently
released features, The Substitute and The Arrival. PLDC has
agreed to pay a specified percentage of the applicable film's
production or acquisition cost to obtain such Japanese
distribution rights. PLDC is an affiliate of the Company's
largest shareholder, Pioneer.
The Company and Pioneer are also discussing two additional
agreements relating to the Company's motion picture productions.
New Distribution Agreements
In addition, on February 14, 1996, the Company and Orion
entered into a Multiple Picture Deal Output Agreement (the
"Orion Agreement") for the theatrical distribution by Orion in
the United States and Canada of the Company's theatrical
productions. The Orion Agreement provides for Orion to
theatrically release, for certain distribution fees, five motion
pictures acquired or produced by the Company. See Entertainment
Production, Marketing and Distribution Operations - General, for
a further description of titles included in this agreement.
Simplification of Corporate Structure
In the fourth quarter of 1995, in order to simplify the
corporate reporting and tax structure, several non-operating
corporate subsidiary companies were merged into LIVE Home Video
Inc., including its then subsidiary LIVE Film and Mediaworks
Inc. LIVE Home Video Inc. subsequently changed its name to LIVE
Film and Mediaworks Inc.
Management Changes
Since the beginning of 1995, Anthony J. Scotti, Michael J.
White, R. Timothy O'Donnell, Frans Afman and Roger Smith have
resigned from or decided not to stand for reelection to the
Board of Directors, and Messrs. Melvin Pearl, Charles MacDonald,
Michael Jay Solomon, Akira Niijima and Makoto Koshiba have been
elected or appointed as Directors. The departures of Messrs.
Scotti, White, O'Donnell, Afman and Smith from the Board of
Directors were not the result of any dispute with the Company.
Entertainment Production, Marketing and Distribution Operations
General
Historically, the operations of the Company and VCL focused
on the acquisition and distribution of home video programming in
the United States and Canada (through LFM) and in German-speaking
Europe (through VCL), by marketing and distributing
videocassettes to wholesalers, retailers and consumers directly.
LIVE controls the United States and Canadian home video rights
(hereinafter referred to as "domestic home video rights") to a
catalog in excess of 2,000 titles, inclusive of approximately
1,000 titles acquired from Vestron Inc. ("Vestron") in 1991.
(Vestron was an independent home video supplier with
approximately 1,000 titles in its catalog, including such titles
as Dirty Dancing, Platoon, Hoosiers, the Smithsonian Series, the
National Audubon Series and others, and the rights to exploit
all sequels to Dirty Dancing.) Vestron is now a label owned and
distributed by the Company.
During the past few years the Company has found it
increasingly difficult to acquire just the domestic home video
rights to quality motion picture productions on terms the
Company believed to be commercially attractive. This trend was
exacerbated by the bankruptcy of Carolco, its most reliable
source of A+ motion picture product, and by the acquisition by
major studios of a number of independent production and
distribution companies from whom the Company had acquired video
rights in the past, such as New Line Cinema Corporation and
Miramax Pictures. Thus, in early 1994, the Company announced
plans to expand its business activities into the theatrical
release of a limited number of motion pictures and the direct
licensing of international, television rights and other
ancillary rights to third parties rather than through
intermediaries. Further, in late 1994, the Company released its
first interactive product through its newly formed interactive
division. This expansion is meant to enhance its core video
business without the addition of significant overhead costs.
Examples of this activity include the Company's
acquisition of all rights to the film Wagons East (a Western
comedy starring John Candy and Richard Lewis), as well as the
Company's acquisition of various rights to the motion picture
Top Dog, a Chuck Norris film that was released theatrically in
early 1995. International and television rights were among the
rights acquired in both these productions. In addition, in 1995
the Company entered into agreements to acquire, upon completion,
two major theatrical motion pictures, The Substitute, an action
thriller directed by Robert Mandel and starring Tom Berenger,
Ernie Hudson, Glenn Plummber, and Diane Venora, and The Arrival,
writer/director David Twohy's sci-fi thriller, with Charlie
Sheen, Ron Silver, Terri Polo, and Lindsay Crouse. The two
pictures were released in the United States theatrical market in
early 1996 through Orion, who will be responsible for the United
States and Canadian theatrical distribution of a package of five
pictures produced by the Company under the Orion Agreement
discussed above. Other motion pictures to be produced or
acquired by the Company and released theatrically by Orion
through this package deal include the hit German Comedy
Maybe...Maybe Not ("Der Bewegte Mann"), which has garnered
acclaim in festivals worldwide and stars Til Schweiger, Trees
Lounge, written and directed and starring indie film favorite
Steve Buscemi, with an ensemble cast including Anthony LaPaglia,
Chloe Sevigny and cameos by Mimi Rogers, Daniel Baldwin, and
Carol Kane, among others with a special appearance by Samuel
Jackson, and Phat Beach, a black hip hop comedy.
As an independent distribution company, the Company
acquires distribution rights to programming from a variety of
sources, including production companies and independent
producers. Distribution rights which the Company may acquire
include (a) domestic: theatrical, home video, free television,
pay television (including cable and pay-per-view), and
electronic publishing, and (b) international: all media. The
Company often acquires the rights to completed motion pictures.
However, in order to secure rights to motion pictures which
might not otherwise be available to the Company (such as
international, television and interactive), and to acquire a
wider array of distribution rights on more favorable terms, the
Company also secures the rights to motion pictures prior to or
during production. In such cases, the Company frequently
becomes involved with, and has active input on, projects at the
earliest possible date, from development through physical
production and completion of the finished film, and generally
may have input over all key production elements.
With the Company's involvement in the early production
stages of a film's development, it will continue to be difficult
to predict the theatrical acceptance of any particular motion
picture the Company may acquire or produce. The theatrical
results of a motion picture is a significant factor in
generating revenues in all media, including home video.
The United States Motion Picture Industry
The United States motion picture industry encompasses the
production and theatrical exhibition of feature-length motion
pictures and the subsequent distribution of such pictures in
home video, television and other ancillary markets. The
industry is dominated by the major studios, including Universal
Pictures, Warner Bros., Twentieth Century Fox, MGM, Sony
Pictures Entertainment (including Columbia Pictures and Tri-Star
Pictures), Paramount Pictures and The Walt Disney Company, which
historically have produced and distributed the majority of
theatrical motion pictures released annually in the United
States. There are also a large number of smaller production
companies that produce theatrical motion pictures and have
played an important role in the production of motion pictures
for the worldwide feature film market.
The "majors" generally own their production studios and
have national or worldwide distribution organizations. Major
studios typically release films with direct production costs
ranging from $10 million to $100 million or more and provide a
continual source of motion pictures to the nation's theater
exhibitors. The independents do not own production studios and,
with certain exceptions, have more limited distribution
capabilities than the major studios. Independents typically
produce fewer motion pictures at substantially lower average
production costs than major studios.
Motion Picture Financing and Production
As with the major studios, the Company is involved in the
production and financing of a variety of motion pictures. The
typical cost of a motion picture produced by a major studio for
wide release averages more than $36 million. The Company
intends to keep its average production budget to less than $20
million, although it may spend more for titles it believes to
have significant commercial potential. Production costs consist
of acquiring or developing the screenplay, film studio rental,
cinematography, post-production costs and the compensation of
creative and other production personnel. Distribution expenses,
which consist primarily of the costs of advertising and release
prints, are not included in direct production costs.
Independent production companies generally avoid incurring
the substantial overhead costs of the majors by hiring creative
and other production personnel and retaining the other elements
required for pre-production, principal photography and
post-production activities on a project-by-project basis. Unlike the
major studios, the independents also typically finance their
production activities from discrete sources rather than out of
cash flow. Such sources include bank loans, "pre-sales," equity
offerings and joint ventures. Independents generally attempt to
complete their financing of a motion picture production prior to
commencement of principal photography, at which point
substantial production costs begin to be incurred and require
payment.
"Pre-sales" are often used by independent film companies to
finance all or a portion of the direct production costs of a
motion picture. Pre-sales consist of fees paid to the producer
by third parties in return for the right to exhibit the
completed motion picture in theaters or to distribute it in home
video, television, foreign or other ancillary markets.
Producers with distribution capabilities, such as the Company,
may retain some or all of the rights to distribute the completed
motion picture either domestically or in one or more foreign
markets. The Company typically will license a motion picture's
foreign rights among several international licensees under such
pre-sale agreements.
Both major studios and independent film companies often
acquire motion pictures for distribution through an industry
arrangement known as a "negative pickup," under which the studio
or independent film company agrees to acquire from an
independent production company all rights to a film upon
completion of production. The independent production company
normally finances production of the motion picture pursuant to
financing arrangements with banks or other lenders in which the
lender is granted a security interest in the film and the
independent production company's rights under its arrangement
with the studio or independent. When the studio or independent
"picks up" the completed motion picture, it assumes (and in the
case of the Company, most often simply pays) the production
financing indebtedness incurred by the production company in
connection with the film. In addition, the independent
production company is paid a production fee and generally is
granted a participation in the net profits from distribution of
the motion picture. Examples of films the Company has recently
acquired through negative pickup arrangements include Top Dog
and The Substitute.
Both major studios and independent film companies generally
incur various third-party participations in connection with the
distribution and production of a motion picture. These
participations are contractual rights of actors, directors,
screenwriters, owners of rights and other creative and financial
contributors entitling them to share in revenues or net profits
(as defined in the respective agreements) from a particular
motion picture. Except for the most sought-after talent,
participations are generally payable after all distribution and
marketing fees and expenses, direct production costs and
financing costs are paid in full.
Motion Picture Distribution
Motion picture distribution encompasses the exploitation of
motion pictures in theaters and in ancillary markets such as
home video, pay-per-view, pay television, broadcast television,
foreign and other markets. Motion pictures may continue to play
in theaters for up to six months following their initial
release. Concurrently with their release in the United States,
motion pictures generally are released in Canada and may also be
released in one or more other foreign markets. The motion
picture then becomes available for distribution in other markets
as follows:
Months After Approximate
Initial Release Release Period
Domestic home video 4-6 months ----
Domestic pay-per-view 4-6 months 3 months
Domestic pay television 6-10 months 12-21 months
Domestic network/basic cable 30-36 months 18-36 months
Domestic syndication 30-36 months 3-15 years
Foreign home video 6-12 months ----
Foreign television 18-24 months 18-30 months
The distributor typically acquires rights from the producer
to distribute a motion picture in one or more of the markets
described above. The distributor typically agrees to advance
the producer a non-refundable minimum royalty or guarantee,
which is to be recouped by the distributor out of revenues
generated from the distribution of the motion picture in
whatever markets it has acquired. Generally, the producer also
is entitled to receive a participation equal to an agreed-upon
percentage of all net revenues received from distribution of the
motion picture over and above the advance once the advance is
recouped. As noted, the Company in the past generally acquired
only domestic home video rights, but now seeks to control or
acquire all rights to films it produces or licenses from third
parties.
Theatrical Distribution
The theatrical distribution of a motion picture involves
the manufacture of release prints, the promotion of the picture
through advertising and publicity campaigns and the licensing of
the motion picture to theatrical exhibitors. The size and
success of the promotional advertising campaign can materially
affect the revenues realized from the theatrical release of a
motion picture. The costs incurred in connection with the
distribution of a motion picture can vary significantly,
depending on the number of screens on which the motion picture
is to be exhibited, the actual cost and scope of the media
advertising expenditures and campaign and the ability to exhibit
motion pictures during peak exhibition seasons. Competition
among distributors for theaters during such seasons is great.
Similarly, the ability to exhibit motion pictures in the most
popular theaters in each area can affect theatrical revenues.
The distributor and theatrical exhibitor generally enter
into an arrangement providing for the exhibitor's payment to the
distributor of a percentage of the box office receipts for the
exhibition period, in some cases after deduction of the
theater's overhead, or a flat negotiated weekly amount. The
distributor's percentage of box office receipts generally ranges
from an effective rate of 35% to over 50%, depending upon the
success of the motion picture at the box office. Distributors
carefully monitor the theaters which have licensed the picture
for exhibition to ensure that the exhibitor promptly pays all
amounts due the distributor. Substantial delays in collection
are not unusual. When the Company acquires all rights to a
motion picture having theatrical potential, it currently engages
the services of a theatrical distribution company to handle the
theatrical exhibition of the film in the United States. In the
past, the Company has used the services of MGM Pictures. The
Company now has a theatrical distribution arrangement with Orion
as described above. The Company views theatrical distribution
of films to be a source of advertising and promotion to enhance
the home video and other distribution revenues to be received
from the film. The Company does not believe that theatrical
distribution of its motion picture products will be a source of
material profits.
Home Video
The home video distribution business involves the promotion
and sale of videocassettes and videodiscs to distributors as
well as local, regional and national video retailers (e.g.,
video specialty stores, convenience stores, record stores and
other outlets), which then rent or sell such videocassettes and
videodiscs to consumers primarily for private viewing.
Major feature films are usually scheduled for release in
the home video market within four to six months after theatrical
release to capitalize on the theatrical advertising and
publicity for the film. Promotion of new releases is generally
undertaken during the nine to twelve weeks before the release
date. Videocassettes of feature films are generally sold to
domestic wholesalers at approximately $50 to $60 per unit and
generally are rented by consumers for fees ranging from $1 to $5
per day. Wholesalers who meet certain sales and performance
objectives may earn rebates, return credits and cooperative
advertising allowances. Selected titles, including certain
made-for-video programs, are priced significantly lower (at a
wholesale price ranging from $5 to $19 per unit) to encourage
direct purchase by consumers. Direct sale to consumers is
referred to as the "priced-for-sale" or "sell-through" market.
Overall growth in the domestic home video market has slowed
as growth in the number of new outlets and new VCR homes has
moderated. The growth in outlets designed to serve the rental
market has remained essentially flat for the past several years,
while the number of new outlets which offer videocassettes and
videodiscs for sale has increased. The sell-through market
continues to be a seasonal business, except for feature films
initially released on home video at prices generally below $30.
Furthermore, new technologies which regional telephone companies
and others are developing could make competing delivery systems
economically viable and could alter the home video marketplace.
See a more complete description of the Company's home video
distribution operations under "Acquisition of Motion Picture
Distribution Rights by the Company - Domestic Home Video
Distribution Rights."
Pay-per-view
Pay-per-view television allows cable television subscribers
to purchase individual programs, including recently released
motion pictures and live sporting, music or other events, on a
"per use" basis. The subscriber fees are typically divided
among the program distributor, the pay-per-view operator and the
cable system operator.
Pay Television
Pay television allows cable television subscribers to view
HBO, Cinemax, Showtime, The Movie Channel, Encore and other pay
television network programming offered by cable system operators
for a monthly subscription fee. The pay television networks
acquire a substantial portion of their programming from motion
picture distributors.
Broadcast and Basic Cable Television
Broadcast television allows viewers to receive, without
charge, programming broadcast over the air by affiliates of the
major networks (ABC, CBS, NBC and Fox), independent television
stations and cable and satellite networks and stations. In
certain areas, viewers may receive the same programming via
cable transmission for which subscribers pay a basic cable
television fee. Broadcasters or cable systems operators pay
fees to distributors for the right to air programming a
specified number of times.
Foreign Markets
In addition to their domestic distribution activities, some
motion picture distributors generate revenues from distribution
of motion pictures in foreign theaters, home video, television
and other foreign markets. There has been a dramatic increase
in recent years in the worldwide demand for filmed
entertainment. This growth is largely due to the privatization
of television stations, introduction of direct broadcast
satellite services, growth of home video and increased cable
penetration.
Other Markets
Revenues also may be derived from the distribution of
motion pictures to airlines, schools, libraries, hospitals and
the military, licensing of rights to perform musical works and
sound recordings embodied in a motion picture, and rights to
manufacture and distribute games, dolls, clothing and similar
commercial articles derived from characters or other elements of
a motion picture.
New Technologies
New means of delivery of entertainment product are
constantly being developed and offered to the consumer. The
exact impact of emerging technologies such as digital video
discs ("DVD"), direct broadcast satellites, the internet, etc.
on the Company's operations cannot be determined at this time.
However, in its role as a producer and holder of entertainment
copyrights, the Company is positioning itself to take advantage
of whatever delivery options are available to it, and is
constantly monitoring these new media possibilities.
Acquisition of Motion Picture Distribution Rights by the Company
General
Distribution rights to motion pictures can encompass
various media (e.g., theatrical, home video, free or pay
television, electronic publishing, CD-ROM, interactive) and
various markets or territories (e.g., the United States and
Canada, Great Britain and Japan). In the past, the Company
generally acquired only home video rights and not the rights to
broadcast or cablecast programs or to exhibit programs on
pay-per-view television or in movie theaters or similar
locations. Historically, where these other rights were
acquired, the Company exploited them by sublicensing the rights
to third parties whose principal businesses included
exploitation of such rights. In early 1994, the Company
expanded its business activities into the theatrical
distribution of a limited number of motion pictures and the
direct licensing of international and television rights to third
parties rather than through intermediaries. Now, where
possible, the Company focuses on the acquisition of worldwide
distribution rights to a motion picture in all media, or, where
feasible, distribution rights in all media for either the North
American or international market places.
The Company's decision process in acquiring a finished or
an unfinished movie is similar. The Company collects
information concerning new motion pictures being contemplated or
entering the production cycle. This information is obtained
from trade sources and from personal relationships and contacts.
The acquisition process focuses on productions which seem most
likely to fit the Company's requirements for worldwide
marketability and profit potential. Before the Company acquires
distribution rights for any motion picture, the Company analyzes
not only the picture's projected costs, revenues and scheduling,
but also the effect of these assumptions on overall Company
performance. Management bases its acquisition decisions on the
results of this evaluation process and will not make offers on
any one project with risks that, in management's opinion, could
materially adversely affect the Company's profitability. The
Existing LIVE Credit Facility imposes limitations on the size of
minimum guarantees the Company can incur without the lender's
approval.
When the Company acquires distribution rights to a motion
picture prior to its production, it controls its development
expenditures by making only limited commitments to advance funds
before completion. After acquisition of the rights of a motion
picture prior to its production, the Company typically has
approval rights over key product elements and maintains a
production supervisory staff to monitor the production process.
Overhead and general expenditures are kept at a minimum level,
as the Company does not own any production facilities or
significant production staff.
Domestic Theatrical Distribution Rights
Historically, LIVE only occasionally acquired theatrical
distribution rights to certain of its films. However, when
those rights were acquired - for films such as Tom and Jerry -
The Movie, Reservoir Dogs, Bad Lieutenant, American Heart, Light
Sleeper and Bob Roberts, for example - LIVE exploited the rights
by sublicensing them to third parties whose principal businesses
included exploitation of such rights. Management of the Company
considers the theatrical distribution of a film extremely
important as a marketing tool which enhances video and
international sales and thus LIVE now intends to acquire
theatrical distribution rights as part of the overall
acquisition where possible, even if a film ultimately will not
be released theatrically. The Company anticipates releasing
theatrically five films during fiscal 1996. As of
August 1, 1996, the Company had released The Arrival, directed
by David Twohy (writer of The Fugitive and Waterworld), The
Substitute, directed by Robert Mandel (director of School Ties,
fx and Big Shots), and Maybe . . . Maybe Not, in the United
States through its relationship with Orion. The Company
generally targets motion pictures for distribution on a national
basis which can result in substantial amounts being expended for
the costs of national advertising and the manufacturing of
initial release prints. The exception to this national focus
would be certain motion pictures that would be targeted to
various demographic audiences, as opposed to the mainstream
public, and such pictures would be distributed on a more
regional, less expensive, basis. While the Company does not
believe that theatrical distribution of its motion pictures will
be a source of material profits due to the risks inherent in
that business, management of LIVE believes that the theatrical
market has significant upside potential should any particular
film perform well. It is not uncommon for heavily advertised
films with theatrical losses to have increased performance in
video and other ancillary media that partially or totally offset
such losses.
Of those films to which the Company holds domestic
theatrical distribution rights, LIVE intends to release some
through its own distribution channels or distribute them through
third parties such as Orion. The Company exploited Top Dog, a
film starring Chuck Norris and for which the Company acquired
all U.S., Canadian and Japanese distribution rights in early
1995 through the theatrical distribution division of MGM. In
addition, the Company is in various stages of post production,
production, development and pre-production on a number of
projects, including I, Assassin, executive produced by Mace
Neufeld and Robert G. Rehme (producers of Beverly Hills Cop III,
Patriot Games), and intends to have all of these films
distributed theatrically in the United States.
Domestic Home Video Distribution Rights
LIVE has developed operating strategies which it believes
enhance sales and profit growth potential by focusing on
securing long-term access to commercially viable motion pictures
primarily for video release. It categorizes the feature films
it releases in video by reference to relative acquisition costs
and expected unit sales. "A+" titles generally are those films
with some combination of significant box office revenues,
established stars, wide theatrical distribution and/or large
budgets. "A" titles usually are feature films with cast or
other elements which give them a defined audience appeal and
which also receive wide theatrical distribution. Those films
categorized as "B" titles generally include a variety of more
modestly budgeted films which, if released theatrically, are
done so on a limited or regional basis. In addition to motion
picture product, the Company also acquires non-theatrical
programming such as sports and fitness programming, children's
programming, special interest products and interactive programs.
Pursuant to various agreements with independent motion
picture producers, the Company released on home video 24 feature
film titles during 1995. This included the successful video
rental and sell through release of the major motion picture
Stargate. LIVE anticipates releasing on home video a total of
between 50 to 75 feature films in 1996 through 1998. Management
believes that, under current market conditions, "B" titles
generally will be available at favorable prices on a title by
title basis, either in the pre-production stage or as finished
product. LIVE also intends to continue to aggressively pursue
opportunities to acquire video rights in children's, budget line
and special interest programming.
Domestic home video rights, when acquired under exclusive
licenses without other rights, are typically acquired for a term
of 15 years or more, in return for non-refundable advances
against future royalties which are generally based on either a
percentage of the Company's wholesale selling price or a
percentage of profit contribution derived from the sale of
videocassettes. In most instances, the advance is paid on or
after the delivery of the applicable picture to the Company,
which typically occurs six to twelve months prior to video
release. Furthermore, the licenses may require the film's
producer or distributor to make certain minimum print and
advertising expenditures toward the theatrical release of the
motion picture. In those instances where the Company pays a
substantial portion of the royalty advance prior to completion,
a completion bond in favor of the Company guaranteeing that a
movie will be finished is almost always required, or the funds
are escrowed or secured by a letter of credit. Acquisition
costs vary substantially from title to title, depending on the
Company's assessment of the projected demand for the program.
LIVE, under its children's programming label, Family Home
Entertainment ("FHE"), has over the years built a substantial
library of children's titles. FHE has secured worldwide rights
to release videocassettes of the Teenage Mutant Ninja Turtles
animated television series. LIVE also has an agreement with
Broadway Video Entertainment granting it home video rights to
programs including Rudolph the Red Nosed Reindeer, Frosty the
Snowman, Santa Claus is Coming to Town, The Little Drummer Boy,
Here Comes Peter Cottontail and Frosty Returns. (Broadway Video
Entertainment has recently agreed to sell its family
entertainment library to Golden Books Family Entertainment Inc.
and it is unclear at this time whether LIVE will be able to
renew its license to distribute these programs when the current
agreement expires in 1997.) In addition, license agreements
have been secured for programming featuring the products of
major toy manufacturers including such licensed characters as
Robotech, Pound Puppies, G.I. Joe, Transformers, JEM, Mapletown,
Velveteen Rabbit, Strawberry Shortcake, The Mad Scientist,
Babar, Care Bears, Bucky O'Hare, Hello Kitty and Friends,
Phantom 2040, Papa Beaver, The Highlander (animation), Enchanted
Camelot, Skysurfer Strike Force, The Bears Who Saved Christmas,
Santa's Christmas Crash, Santa's Christmas Snooze, Princess
Gwenevere, Flash Gordon, The Littlest Pet Shop and Baryshnikov
Stories From Childhood. Management of the Company intends to
continue LIVE's emphasis on building and exploiting its FHE
library.
LIVE also distributes non-theatrical products such as the
Smithsonian Series and the Audubon Series. LIVE distributes
music videos, including those by Michael Jackson, the Rolling
Stones and the Doobie Brothers. Sports and fitness titles
include the PGA Tour, a Jose Canseco instructional tape and
Paula Abdul and Marla Maples fitness tapes.
LIVE maintains its own sales organization which prepares
sales and marketing plans for new release and catalog
promotions, and, in conjunction with the sales force of WEA,
works closely with wholesale distributors, rackjobbers and key
retailers in the United States. Pursuant to an agreement
expiring in May 1998, WEA handles all physical aspects of United
States sales, distribution, billing and collections for the
Company. The Company has a similar arrangement with MCA Canada
Ltd., with respect to the Company's Canadian sales, marketing
and distribution activities under an agreement that expires in
1997, subject to a three year option to extend in favor of LIVE
America Inc.
In 1994, management of the Company decided to begin
releasing fewer rental titles per month than in prior years for
a number of reasons, among them being: (a) fewer titles being
purchased by LIVE since late 1991 due to the liquidity problems
encountered by the Company since that time, (b) a shift in
rental market tastes, with a much greater portion of video store
purchases being devoted to theatrically released "A" titles than
direct-to-video or direct-to-television "B" titles that have
been the predominant titles released by the Company since 1992
and (c) an increase in the absolute number of "B" titles in the
marketplace, resulting in increased competition for decreasing
retailer purchase funds. Management of the Company has
addressed these issues by (i) reducing its number of rental
titles released per month, particularly the direct-to-video "B"
titles, allowing LIVE's marketing and sales forces to place
increased emphasis on a smaller number of titles, (ii) acquiring
more rights to films than only domestic video rights (including
theatrical, television, international and CD-ROM) and
diversifying its business to license such additional rights
directly rather than through intermediaries, (iii) continuing
LIVE's focus on the sell-through business, exploiting the
Company's library of over 2,000 titles including children's and
special interest programs and (iv) attempting to release a
higher percentage of "A" titles by increasing its efforts to
acquire films with greater theatrical release potential.
Management of LIVE believes that the decrease in revenues
due to fewer rental releases per month will eventually be
compensated for through a combination of increased ancillary
revenues (such as theatrical, television, international and
CD-ROM) and higher revenues per rental release due to a combination
of increased focus on fewer titles and a higher percentage of
"A" title acquisitions. There is no assurance that this will be
the case, however.
Television Distribution Rights
Television distribution rights will be acquired by the
Company where available. Television networks, independent
television networks, television stations and cable system
operators generally license television series, films and film
packages (consisting of theatrically released feature films and
made-for-television movies) pursuant to agreements with
distributors or syndicators that allow a fixed number of
telecasts over a prescribed period of time for a specified cash
license fee or for barter of advertising time. LIVE distributes
the television rights to films it acquires through its own
staff.
International Distribution Rights
International distribution rights include rights in various
media (e.g., television, theatrical and home video) and to
various territories (e.g., the United Kingdom, Japan and the
Benelux nations). To acquire these rights, the Company is
required to pay a minimum guarantee. The minimum guarantee,
along with specific recoupable marketing and other expenses, is
recovered from the motion picture's gross revenues before the
producer begins to participate in the net revenues.
Historically, the Company only occasionally acquired
international distribution rights to certain of its films,
mainly through the acquisition of the Vestron library. LIVE has
for some time maintained a small in-house international sales
staff and utilized outside sales agents to exploit those rights.
However, often when international rights were acquired (e.g.,
for films such as Light Sleeper), LIVE exploited the rights by
sublicensing them to third parties whose principal businesses
included the further sublicensing of such rights, and the
Company paid a fee for such sublicensing activities. In 1994,
the Company expanded its sales force to manage international
sales and to more aggressively promote its motion pictures at
foreign film markets, including the Cannes Film Festival in
France, the American Film Market in Los Angeles and MIFED in
Italy.
Competition
Success in the entertainment marketplace is largely
dependent on a company's ability to acquire rights to
programming at attractive prices and upon the subsequent
performance of this programming in the marketplace. With the
exception of certain output agreements described above under
"Acquisition of Motion Picture Distribution Rights by the
Company; Domestic Home Video Distribution Rights," the Company
generally acquires distribution rights on a film-by-film basis.
The Company faces significant competition both in obtaining
distribution rights and in selling products. The Company's
competitors for product acquisitions are companies such as New
Line, HBO and Trimark, and it competes with these companies as
well as major studios in the marketing of its product. Certain
of the Company's competitors, particularly those affiliated with
major studios or pay television broadcasters, have significantly
greater financial resources than the Company. Competition for
distribution rights is based primarily on the amount of the
advances which companies are willing to offer to producers as
well as on the producer's perception of the company's marketing
capabilities and its commitment to marketing the release of a
film.
Regulation Affecting the Company
Distribution rights to motion pictures are granted legal
protection under the copyright law of the United States and most
foreign countries, which provide substantial civil and criminal
sanctions for unauthorized duplication and exhibition of motion
pictures. The Company endeavors to maintain copyright
protection for all its films under the laws of all applicable
jurisdictions.
United States television stations and networks as well as
foreign governments impose restrictions on the content of motion
pictures which may restrict in whole or in part exhibition on
television or in a particular territory. There can be no
assurance, therefore, that current or future restrictions on the
content of Company films may not limit or affect the Company's
ability to exhibit certain of such motion pictures in such media
or markets.
Major Customers
During the year ended December 31, 1993, no one customer
accounted for more than 10% of the net sales of the Company.
During the year ended December 31, 1994 two customers accounted
for 23.3% of net sales of LIVE and during the year ended
December 31, 1995 two customers accounted for 34.0% of net sales
of the Company.
Employees
As of August 1, 1996, the Company had 124 full-time regular
employees. None of the Company's employees are covered by a
collective bargaining agreement and the Company believes that
its employee relations are good.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth information with respect to
the Directors and executive officers of the Company as of August
1, 1996.
Name Age Position
Jay Burnham 33 Director
Makoto Koshiba 52 Director
Jonathan D. Lloyd 43 Director
Akira Niijima 52 Director
Ryuichi Noda 61 Director
Masao Nomura 46 Director
Melvin Pearl 60 Director
Gregory R. Pierson 37 Director
Charles MacDonald 37 Director
Michael Jay Solomon 58 Director
Charles A. Yamarone 37 Director
Roger A. Burlage 53 Director; Chairman of the
Board and Chief Executive
Officer of the Company and
LIVE Film and Mediaworks
Inc. ("LFM")
Ronald B. Cushey 39 Director; Executive Vice
President/Chief Financial
Officer and Corporate
Secretary of the Company
and LFM
Paul Almond (1) 53 Executive Vice
President/Production and
Acquisitions of LFM
Steven E. Mangel (1) 42 Executive Vice
President/Legal and
Business
Affairs/International Sales
and General Counsel of LFM
Elliot Slutzky (1) 47 Executive Vice
President/Sales and
Marketing of LFM
Robert L. Denton 36 Senior Vice President/Chief
Accounting Officer of the
Company and LFM
____________
(1) Executive officers of LFM who were determined by the Board
to be executive officers of the Company effective as of
January 1, 1995 by virtue of the policy making functions
that they perform for the Company.
Mr. Burlage has served as President and Chief Executive
Officer of LIVE and LFM since January 1994, became a Director of
the Company in December 1994 and Chairman of the Board in March
1996. From 1989 until joining LIVE, Mr. Burlage served as
President and Chief Executive Officer of Trimark Holdings, Inc.
("Trimark"), a diversified entertainment company. Prior to
joining Trimark, Mr. Burlage served in several other capacities
in the entertainment industry, including positions with New
World Pictures, Ltd. ("New World") and with AVCO Corporation and
AVCO Embassy Pictures.
Mr. Burnham, a Director of the Company since June 1993, has
been an investment analyst with DDJ Capital Management ("DDJ"),
a diversified investment management firm, since March 1, 1996.
From January 1, 1995 until he joined DDJ, Mr. Burnham was a Vice
President of Libra Investments, Inc. ("Libra"), a specialized
investment banking firm. From June 1990 until he joined Libra,
Mr. Burnham performed investment analyst services for Paul D.
Sonz Partners, a diversified investment services firm. From
August 1987 until June 1990, he was an investment analyst with
Columbia Savings and Loan Association, a financial savings
institution. Mr. Burnham is a Director of Bally's Las Vegas, a
hotel and gaming establishment located in Las Vegas, Nevada.
Mr. Koshiba has been a Director of the Company since May
1995 and has been General Manager of the Finance Division of
Pioneer since August 1993. From September 1991 to August 1993,
Mr. Koshiba served as Executive Vice President, Secretary and
Treasurer of Pioneer Electronics Capital Inc., a company engaged
in the business of providing financing to the United States
Pioneer companies. From August 1985 to September 1991, Mr.
Koshiba was Secretary and Treasurer of Pioneer Electronics (USA)
Inc., a company engaged in sales and marketing of consumer
electronics in the United States.
Mr. Lloyd, a Director of the Company since June 1993, is
currently Managing Director of Mandeville Partners, LLC, a
venture capital and investment banking concern concentrating in
telecommunications and media. From 1993 to July 1995, Mr. Lloyd
was the Chairman, President and Chief Executive Officer of
OpTel, Inc. ("OpTel"), a company engaged in the provision of
cable television services. He is also the Chairman of Vanguard
Communications, L.P., a privately held developer and operator of
microwave cable television systems. Prior to joining OpTel, Mr.
Lloyd was the President of Qintex Entertainment, Inc.
("Qintex"), a company engaged in the development and production
of television programming, a position he held from January 1990
until he became President of OpTel. From April 1988 to January
1990, Mr. Lloyd was the Executive Vice President and Chief
Financial Officer of Qintex. From January 1986 to April 1988,
Mr. Lloyd was Executive Vice President and Chief Financial
Officer of Hal Roach Studios, Inc., a producer and distributor
of television programming and home video product.
Mr. Niijima became a Director of the Company on July 11,
1996. Mr. Niijima joined Pioneer in April 1969. In October
1995 he was named President of Pioneer North America, Inc.
("PNA"), and is responsible for corporate planning, shareholder
relations and legal matters involving PNA and its subsidiaries.
Mr. Noda became a Director of the Company in December 1994.
Mr. Noda became President of Pioneer LDC, Inc. ("PLDC"), a
subsidiary of Pioneer, in April 1991 and has been a Director of
Pioneer since December 1988. From October 1988 to April 1991,
he was Deputy General Manager of the International Division of
Pioneer. From January 1986 until October 1988, he was President
and Chief Executive Officer of Pioneer Electronics (USA) Inc.
From 1985 to 1986, he served as General Manager of the Planning
and Coordination Department of the International Division of
Pioneer. Mr. Noda also served as a Director of Carolco Pictures
Inc. ("Carolco"), a diversified entertainment company engaged in
the financing, production and leasing of motion picture
properties worldwide, until his resignation from Carolco's Board
on November 10, 1995. In November 1995, Carolco filed for
reorganization under Chapter 11 of the United States Bankruptcy
Code.
Mr. Nomura became a Director of the Company on November 9,
1993. He has served as Secretary, Treasurer and Chief Financial
Officer of Pioneer Entertainment (USA) L.P. ("Pioneer USA")
since March 1987.
Mr. MacDonald became a Director of the Company on May 2,
1996. He is an individual investor performing investment
analysis and managing a portfolio of stocks, high yield bonds
and limited partnerships. From November 1987 to July 1995, Mr.
MacDonald was a Securities Analyst and Portfolio Manager for
Elliott Associates, L.P., a New York based investment management
firm. From June 1985 to October 1987, Mr. MacDonald worked for
Chemical Bank as an associate in the Equities Group. Mr.
MacDonald also serves as a director of Bio-Technology General
Corp.
Mr. Pearl become a director of the Company on May 2, 1996.
He is a senior partner in the law firm of Katten Muchin & Zavis
and was one of its founding partners in June, 1974. In 1984,
Mr. Pearl formed his own production company and has been an
active film producer in addition to his practice of law. Mr.
Pearl is Chairman of DDM Film Corp. which has produced both
small and large-budgeted films. He is a member of the Board of
Directors, the Executive Committee and former Chairman of the
Compensation Committee, of Cole Taylor Financial Group. He is
also a member of the Board of Guarantee Reserve Life Insurance
Company.
Mr. Pierson became a Director of the Company in April 1994.
Mr. Pierson has been the General Counsel of PNA since 1991.
From 1985 to 1991, Mr. Pierson was an attorney with the law firm
of Adams, Duque & Hazeltine in Los Angeles. Mr. Pierson also
served as a Director of Carolco, until his resignation from
Carolco's Board on November 10, 1995. In November 1995, Carolco
filed for reorganization under Chapter 11 of the United States
Bankruptcy Code.
Mr. Solomon is Chairman and Chief Executive Officer of
Solomon International Enterprises ("SIE"), a Beverly Hills,
California-based international communications company he founded
in 1994. SIE consists of a network of worldwide production and
distribution companies, as well as broadcasting, satellite and
cable program delivery services in various parts of the world.
From 1989 to 1994, Mr. Solomon was President of Warner Bros.
International Television and from 1985 until its 1989 merger
with Warner Bros., he served as President of Lorimar
Telepictures Corporation ("Lorimar"). In 1978, Mr. Solomon
founded Telepictures Corporation and held the position of
Chairman and Chief Executive Officer, prior to its merger with
Lorimar.
Mr. Yamarone become a Director of the Company on May 2,
1996. He has been Executive Vice President and Research
Director of Libra Investments, Inc., a broker-dealer located in
Los Angeles, California, since July 1994. Mr. Yamarone was
Senior Vice President and General Counsel of Libra Investments,
Inc. from October 1991 to June 1994. Mr. Yamarone was Senior
Vice President-Legal of Columbia Savings and Loan, Beverly
Hills, California, from January 1990 to October 1991 and was
also Secretary of Columbia Savings and Loan from January 1990 to
January 1991. Mr. Yamarone also serves as a Director of
Continental Airlines, Inc. and El Paso Electric Company.
Mr. Cushey has served as Executive Vice President and Chief
Financial Officer of LIVE and LFM since January 1995. He became
a Director of the Company on November 9, 1993 and served in that
capacity until May 9, 1995, when he was replaced by Mr. Koshiba.
Mr. Cushey subsequently was reappointed as a Director in June
1995, when Mr. White resigned from the Board. Mr. Cushey was an
Executive Consultant for PNA from April 1992 until December
1994. He served as Chief Financial Officer of Nelson Holdings
International Ltd. and Nelson Entertainment Group (collectively,
"Nelson") from January 1989 until June 1991, after serving as
Nelson's Acting Chief Financial Officer since November 1987.
Mr. Almond was named Executive Vice President, Acquisitions
and Productions, of LFM in January 1994. From 1986 until
joining LFM, Mr. Almond was Senior Vice President, Worldwide
Acquisitions at ITC Entertainment Group, an international motion
picture production and distribution company.
Mr. Mangel has served as Executive Vice President of LFM
and its subsidiaries since July 1994 and currently supervises
the Company's international sales division and its legal and
business affairs department, and acts as its General Counsel.
Previously, Mr. Mangel served as General Counsel and Senior Vice
President/Legal and Business Affairs since August 1989 after
serving as its Vice President since January 1986. From 1979
until joining LFM, Mr. Mangel was a private practitioner,
specializing in copyright and entertainment law, becoming a
member of the law offices of Shapiro and Mangel in 1984.
Mr. Slutzky was named Executive Vice President, Sales and
Marketing of LFM in February 1994. From 1989 until his
appointment at LFM, Mr. Slutzky was President, Marketing and
Distribution, for Epic Productions, Inc. and Vision
International.
Mr. Denton has served as Senior Vice President of Finance
and Chief Accounting Officer of LIVE and LFM since March 1996,
after serving as Vice President and Chief Accounting Officer
since July 1990. From 1982 until joining LIVE, Mr. Denton was
employed by the accounting firm of Ernst & Young LLP, most
recently as Senior Manager.
Executive Committee
The Executive Committee of the Board consists of Messrs.
Burlage, Pearl and Noda. During intervals between meetings of
the Board, the Executive Committee exercises all powers of the
Board (except those powers specifically reserved by Delaware law
to the full Board) in the management and direction of the
business and conduct of the affairs of the Company in all cases
in which specific directions have not been given by the Board.
Compensation Committee
The Compensation Committee of the Board consists of Messrs.
Pierson, Pearl and Solomon. The Compensation Committee
determines executive remuneration.
Stock Option Committee
The Stock Option Committee of the Board consists of Messrs.
Pearl and Solomon. The Stock Option Committee, which was formed
pursuant to the Company's 1988 Stock Option and Stock
Appreciation Rights Plan, as amended (the "1988 Plan"), grants
stock options or stock appreciation rights to selected key
employees of the Company or its subsidiaries, Directors,
consultants or other persons.
Independent Committee
The Independent Committee of the Board consists of Messrs.
Burnham, Lloyd, Pearl and Solomon. Transactions between the
Company, on the one hand, and affiliates of the Company or its
Directors, other than wholly-owned subsidiaries of the Company,
on the other, are referred to the Independent Committee to
ensure that the interests of the Company are protected in any
such transaction.
Audit Committee
The Audit Committee of the Board consists of Messrs. Nomura
and Solomon. The function of the Audit Committee is to review
and approve the selection of, and all services performed by, the
Company's independent auditors; to meet and consult with, and to
receive reports from, the Company's independent auditors, its
financial and accounting staff and its internal audit
department; and to review and act with respect to the scope of
audit procedures, accounting practices and internal accounting
and financial controls of the Company.
Steering Committee
The Steering Committee of the Board consists of Messrs.
Burlage, Pearl and Nomura. The function of the Steering
Committee is to consider the Company's capital needs, coordinate
with Carreden regarding the Equity Rationalization, and make
recommendations to the full Board for the Equity Rationalization
described herein.
The Company does not have a standing Nominating Committee.
Arrangements Pursuant to Which Certain Directors Have Been
Elected
By the terms of the Certificate of Designations,
Preferences and Relative, Participating, Optional or Other
Special Rights of the Outstanding Preferred Stock, the holders
of the Outstanding Preferred Stock, voting as a class, are
entitled to elect four Directors of the Company, and more in
certain events. Messrs. Burnham, Lloyd, Yamarone and MacDonald
have been elected Directors by the holders of the Outstanding
Preferred Stock.
Board Fees
Directors Fees
During 1995, all Directors of the Company were entitled to
receive non-qualified options to acquire 1,000 shares of the
Company's Common Stock for service as a Board member. All
Directors of the Company who are not employed by the Company are
also entitled to receive an annual fee of $10,000 plus $1,000
for attendance at each committee meeting.
Former Chairman of the Board Anthony J. Scotti receives
$25,000 per month for services rendered as Chairman of the Board
of Directors of the Company, and will receive $25,000 per month
through June 1997 for services as a consultant to the Chairman
of the Board after his resignation as Chairman in March 1996.
Mr. Scotti received no other Annual Meeting or committee fees
for his service on the Board.
Arrangements with Board Members
On March 6, 1995, the Stock Option Committee of the Board
granted to all current employees and Directors of LIVE and LFM
(other than members of the Stock Option Committee) who were
holders of options pursuant to the 1988 Plan, the option to
agree to cancel certain options (the "Canceled Options") and to
receive in return therefor new options (the "New Options")
pursuant to the 1988 Plan, all on the following terms and
conditions: (i) the exercise price for the New Options would
equal $3.50, the closing price of the Common Stock on the Small
Cap Market on March 6, 1995, (ii) fifty percent (50%) of the New
Options would vest on March 6, 1996; the remainder would vest on
March 6, 1997, provided that no New Options would vest earlier
than the scheduled vesting date for the corresponding Canceled
Options, and (iii) all New Options would expire on the
expiration date of the corresponding Canceled Options.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1995, the
following Board members served on the Company's Compensation
Committee: former Directors Frans Afman and R. Timothy
O'Donnell and Mr. Pierson. During the fiscal year ended
December 31, 1995, none of the members of the Compensation
Committee were officers or employees of LIVE or any of its
subsidiaries. Furthermore, none of the members of the
Compensation Committee are former officers of LIVE or any of its
subsidiaries. The Company or its subsidiaries had the following
relationships and transactions with members of the Board and the
Compensation Committee, and/or their affiliates.
Arrangements with Mr. Scotti or Affiliates
The Company and former Chairman of the Board Anthony J.
Scotti are parties to an agreement dated December 1993, pursuant
to which the Company agreed, for a term ending in December 1996,
to pay Mr. Scotti $25,000 per month, plus normal Directors
expenses and other out-of-pocket expenses he may incur in
connection with his services to the Company, in return for Mr.
Scotti making himself available to the Company or any video
subsidiary thereof to act as Mr. Burlage's primary reporting
person for the period ending December 31, 1996. Such
compensation is payable as long as Mr. Scotti makes himself
available for such purpose, whether or not the Company actually
utilizes his services and whether or not Mr. Burlage remains in
the Company's employ. The agreement was amended in March 1996
upon Mr. Scotti's resignation to provide for his consulting
services to the Chairman of the Board through June 1997 at the
same rate.
Arrangements with Mr. O'Donnell or Affiliates
In a May 1992 agreement, amended in July and August 1992
and terminated in May 1995, the Company had engaged Jefferson
Capital, an affiliate of former Director R. Timothy O'Donnell, and
Daniels and Associates (collectively, the "Former Financial
Advisors") to review the Company's capital structure, assist in
structuring and placing appropriate working capital facilities
at LFM and to make recommendations with respect to the Company's
capital structure. As part of their engagement, in 1995 the
Former Financial Advisors assisted the Company in obtaining film
project financing from a bank and in August 1995 received a
total fee of $50,000 for such services. LIVE had also agreed to
reimburse the Former Financial Advisors for their reasonable
out-of-pocket expenses, including legal fees, in connection with
such engagement.
Arrangements with Mr. Afman or Affiliates
In July 1994, the Company entered into an agreement with
affiliates of former Director Frans Afman whereby such
affiliates agreed to provide services with respect to the
international licensing of film rights held by the Company. The
fees payable to the affiliates of Mr. Afman are based on the
license fee paid for such rights by unaffiliated third parties.
Such affiliates of Mr. Afman also are entitled to be reimbursed
for certain expenses they incur in connection with the services
they perform under the agreement.
Arrangements with Mr. Pierson, Mr. Niijima, Mr. Noda, Mr.
Koshiba and Mr. Nomura, or their Affiliates
Pioneer and Pioneer USA
Pursuant to an agreement dated October 1995, which amended
and extended an original agreement dated October 1991, LFM
granted Pioneer USA a license for United States laser videodisc
rights to LFM's library of motion pictures (subject to certain
reserved rights) for a term ending in September 1998. Pioneer
USA will pay LFM a total of $4,600,000 ($2,300,000 upon signing
and $2,300,000 on January 1, 1997) under this agreement as a
non-returnable advance recoupable on a cross-collateralized
basis from all royalties payable to LFM under the agreement.
On February 8, 1996, the Company and PLDC entered into an
Output Deal Agreement (the "Pioneer Output Agreement") for the
distribution of the Company's theatrical productions in Japan.
The three year agreement includes all theatrical films that the
Company produces and acquires over the period, excluding LIVE's
two recently released features, The Substitute and The Arrival.
PLDC has agreed to pay a specified percentage of the applicable
film's production or acquisition cost to obtain such Japanese
distribution rights.
Pioneer is the owner of all of the Series C Preferred
Stock. The Series C Preferred Stock bears dividends at the rate
of 5% per annum, payable semi-annually on January 1 and July 1.
The semi-annual dividends on the Series C Preferred Stock
scheduled to be paid to Pioneer on July 1, 1993, January 1 and
July 1, 1994 and 1995, and January 1, 1996 were not paid due to
restrictions on the Company imposed by the terms of the
Outstanding Preferred Stock. Under the terms of the Certificate
of Designations, Preferences and Rights of the Series C
Preferred Stock, any accrued but unpaid dividends on the Series
C Preferred Stock are added to the liquidation preference of the
Series C Preferred Stock on the semi-annual payment date. As of
January 2, 1996, unpaid dividends totalling $2,206,833 from July
1, 1993 through January 1, 1996 had been added to the
liquidation preference resulting in a total liquidation
preference of $17,206,833, and as of September 30, 1996, the
total liquidation preference is expected to equal $17,857,467.
Under the terms of the Certificate of Designations,
Preferences and Relative, Participating, Optional or Other
Special Rights of the Outstanding Preferred Stock, the Company
is prohibited from paying dividends on any junior series of the
Company preferred stock, including the Series C Preferred Stock,
other than from the cumulative net income of LIVE from and after
the date of issuance of the Outstanding Preferred Stock (March
23, 1993). LIVE has had a cumulative net loss since March 23,
1993 and thus has been prohibited from paying dividends on the
Series C Preferred Stock. As a result of such non-payment, the
unreturned liquidation preference of the Series C Preferred
Stock increased to $17,206,833 as of January 1, 1996. As
Pioneer has agreed, upon the closing of the Exchange Offer, to
exchange all of its Series C Preferred Stock for a combination
of Cash and Common Stock (see "Pioneer Agreements"), none of the
accrued dividends on the Series C Preferred Stock will be paid.
The Series C Preferred Stock is convertible into that
number of shares of Common Stock that is equal to the unreturned
liquidation preference of the Series C Preferred Stock divided
by $15.225. Thus, as of January 1, 1996, the Series C Preferred
Stock was convertible into 1,130,170 shares of Common Stock, and
as of September 30, 1996, the Series C Preferred Stock will be
convertible into 1,172,904 shares of Common Stock.
In July 1993, LIVE granted Pioneer, Le Studio Canal+ S.A.
("Le Studio") and RCS Video International Services B.V., a
former shareholder, ("RCS") the right to require LIVE to use its
best efforts to register all Common Stock in the Company owned
by either Pioneer, Le Studio or RCS, whether acquired directly
from the Company, upon conversion of the Series C Preferred
Stock, or upon acquisition of such stock from Carolco pursuant
to the financial restructuring of Carolco that occurred in
October 1993.
In July 1994, a subsidiary of LIVE and an affiliate of
Pioneer reached an agreement whereby an affiliate of Pioneer
received the Japanese theatrical, video and television
distribution rights to the films Wagons East, Top Dog, The Beans
of Egypt, Maine and Goldy III.
Carolco
Pioneer owned approximately 41% of the outstanding voting
equity of Carolco prior to its bankruptcy in 1995. Le Studio
and its affiliates own approximately 17% of the outstanding
voting equity of Carolco. RCS and its affiliates owned
approximately 5.8% of the outstanding voting equity of Carolco.
On November 10, 1995 Carolco filed for protection from its
creditors under the provisions of the United States Bankruptcy
Court.
LIVE was party to an agreement with Carolco entitling the
Company to acquire home video rights in the United States and
Canada for most motion pictures produced or controlled by
Carolco on which principal photography had commenced prior to
July 31, 1995 or for which the Company had paid an advance to
Carolco prior to such date, under a series of agreements. In
1995, LFM made no payments to Carolco and at December 31, 1995
had no recorded contractual obligations under the Domestic
Master Agreement, other than nominal normal royalty overage
amounts.
LIVE, through its former subsidiary, LIVE Entertainment
International Inc. ("LEII"), was party to an agreement with
Carolco International Inc. ("CII") entitling LEII to acquire
home video rights in the German-speaking European market for
most motion pictures produced or controlled by CII on which
principal photography had commenced prior to July 31, 1995 or
for which LFM had paid an advance to CII prior to such date
(other than rights granted by CII to other parties prior to
April 1991), under a master agreement entered into in April 1991
(the "German Master Agreement"). In 1995, LEII did not pay any
advances to CII and at December 31, 1995 had no recorded
contractual obligations under the German Master Agreement.
In January 1995, in order to settle disputes between them
with respect to the ownership of the United States and Canada
video distribution rights to the film Cutthroat Island, the
Company and Carolco reached agreement that Cutthroat Island
would not be subject to either the Domestic Master Agreement or
the German Master Agreement. LIVE also reached agreement with
the distributor of Cutthroat Island whereby the Company obtained
video distribution rights to such film in the United States and
Canada, and Carolco made certain payments to the Company to
compensate the Company for the fact that its distribution fee
under the Cutthroat Island video distribution agreement was less
favorable to the Company than the terms of the Domestic Master
Agreement.
In connection with a former class action litigation
involving the Company, Carolco and certain of the Company's past
and present Directors and executive officers, the Company and
Carolco entered into an agreement dated April 8, 1992, with
respect to the division of legal fees and costs relating to that
litigation. Pursuant to the agreement, 65% of the legal fees
and costs will be paid by the Company and 35% of the legal fees
and costs will be paid by Carolco. LIVE has paid approximately
$25,000 on behalf of Carolco with respect to those costs.
The Company believes that each transaction with an
affiliate of the Company was on terms at least as favorable to
the Company as would have prevailed in arms-length transactions
between unrelated parties. In addition, future transactions
between the Company and its affiliates will be referred to
either the Company's Board or a committee of disinterested
Directors to ensure that the interests of the Company are
protected in any such transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of June 30, 1996, certain
information concerning the ownership of shares of Common Stock
and Series C Preferred Stock. The Series C Preferred Stock
votes on an as converted basis on all matters which may come
before the holders of Common Stock, voting together on such
matters with the Common Stock. As of June 30, 1996, the Series
C Preferred Stock was convertible into 1,158,423 shares of
Common Stock. Information is provided concerning the ownership
of Common Stock and Series C Preferred Stock by (i) the holders
known to the Company of more than 5% of the outstanding shares
of Common Stock or Series C Preferred Stock, (ii) each executive
officer and Director of LIVE and (iii) all executive officers
and Directors of LIVE as a group.
The table includes each person's, entity's and group's
beneficial ownership of Common Stock calculated in accordance
with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and includes shares of Common
Stock issued and outstanding as of June 30, 1996, as well as
shares for which beneficial ownership may be acquired within 60
days of that date. In accordance with Rule 13d-3(d)(1) under
the Exchange Act, any securities not outstanding but which are
the subject of options, warrants, rights, or conversion
privileges (or other arrangements which could result in the
issuance of additional shares of Common Stock by LIVE)
exercisable within 60 days of June 30, 1996, are deemed to be
outstanding for the purpose of computing the percentage of
Outstanding Preferred Stock of the class owned by such person,
but are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
Certain members of the Board named in the table are
affiliated with one of the beneficial owners of more than 5% of
the Common Stock or Series C Preferred Stock (a "5% Owner"). In
certain circumstances, a 5% Owner may be deemed to beneficially
own Common Stock or Series C Preferred Stock held by such
Directors, and vice versa. For purposes of the table below, (i)
the beneficial ownership of a 5% Owner includes such Director's
ownership where indicated by footnote even though the 5% Owner
may disclaim beneficial ownership of such shares and (ii) the
beneficial ownership of the Director does not include such 5%
Owner's beneficial ownership solely by reason of such Director's
affiliation with such 5% Owner.<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK AND SERIES C PREFERRED STOCK [update]
Amount of Beneficial Ownership of
Common Stock as of June 30, 1996 (1)
Name of Beneficial Owner or
Identity of Group Number of Shares Percent
5% Owners
Pioneer. . . . . . . . . . . . . . 1,806,267(2) 49.5%
Le Studio (3). . . . . . . . . . . 257,606 7.1%
FMR Corp (4) . . . . . . . . . . . 391,176 9.7%
Elliott Associates, L.P. (5) . . . 221,058 5.7%
Management
Roger A. Burlage (6) . . . . . . . 47,000 1.3%
Jay Burnham (7). . . . . . . . . . 3,000 *
Ronald B. Cushey (8) . . . . . . . 5,000 *
Ryuichi Noda (9) . . . . . . . . . 2,000 *
Makoto Koshiba (10). . . . . . . . 2,000 *
Jonathan D. Lloyd (11) . . . . . . 3,000 *
Charles MacDonald (12) . . . . . . 1,000 *
Akira Niijima (13) . . . . . . . . 1,000 *
Masao Nomura (14). . . . . . . . . 2,500 *
Melvin Pearl . . . . . . . . . . . 5,000 *
Gregory R. Pierson (15). . . . . . 2,500 *
Michael Jay Solomon. . . . . . . . 0 *
Charles A. Yamarone (16) . . . . . 2,600 *
Paul Almond (17) . . . . . . . . . 6,000 *
Steve Mangel (18). . . . . . . . . 7,134 *
Elliot Slutzky (19). . . . . . . . 11,700 *
Robert L. Denton (20). . . . . . . 1,800 *
All Executive Officers and Directors
as a group**(21) 103,234 2.7%
*Less than 1%
**17 persons comprised of all of those named above
<PAGE>
All of the persons listed in the chart above have sole
voting power and sole investment power over the capital stock
they beneficially own unless otherwise indicated in the
footnotes below.
(1) The number of shares and percentages are based upon
3,646,690 possible votes (comprised of (i) the 2,448,267
votes which may be cast by all holders of outstanding
Common Stock and (ii) the 1,158,423 votes which may be cast
by Pioneer as the sole holder of the Series C Preferred
Stock) as of June 30, 1996. The shares of Common Stock
underlying immediately exercisable options, warrants or
rights, immediately convertible securities, or options,
warrants, rights or convertible securities that become
exercisable or convertible within 60 days of June 30, 1996
are deemed to be outstanding for the purpose of calculating
the number and percentage owned by the holders of such
options, warrants, rights or convertible securities.
(2) Includes 1,158,423 shares of Common Stock issuable upon
conversion of the 15,000 shares of Series C Preferred Stock
held by Pioneer. The Series C Preferred Stock is entitled
to vote together with the Common Stock on all matters
coming before the holders of the Common Stock as if its
holder had converted the Series C Preferred Stock into
Common Stock immediately prior to the relevant record date.
On that basis, Pioneer is entitled to cast 1,158,423 votes
on matters coming before the holders of Common Stock
pursuant to its ownership of the Series C Preferred Stock.
Also includes options to purchase 10,000 shares of Common
Stock held by Pioneer affiliated Directors. The address of
Pioneer USA and PNA is 2265 East 220th Street, Long Beach,
California 90810. The address of Pioneer is 4-1 Meguro, 1
Chome, Meguro-ku, Tokyo 153, Japan.
(3) Represents shares of Common Stock indirectly owned by Le
Studio through its wholly-owned subsidiary Cinepole. In
their most recent Schedules 13D filed with the Commission,
Cinepole claimed shared voting power and shared investment
power over all of its 236,006 shares of Common Stock with
Le Studio and Le Studio's corporate parent, Canal+ S.A.,
and Le Studio claimed shared voting power and shared
investment power over all of its 21,600 shares of Common
Stock with Canal+ S.A. The address of Cinepole is
Surinameweg 2, NL - 2035 VA Haarlem, The Netherlands. The
address of Le Studio is 17, rue Dumont d'Urville, 75116
Paris, France. The address of Canal+ S.A. is 85-89 Quai
Andre Citroen, 75015 Paris, France.
(4) Represents 391,176 shares of Common Stock which are
issuable upon exercise of presently exercisable warrants.
FMR Corp. is the parent of Fidelity Management & Research
Company which manages or advises funds that hold these
warrants. The address of FMR Corp. and Fidelity Management
& Research Company is 82 Devonshire Street, F7E, Boston,
Massachusetts 02109.
(5) Includes 221,058 shares of Common Stock which may be
received within 60 days of June 30, 1996, upon conversion
of 414,485 shares of Outstanding Preferred Stock at $18.75
per share. The address of Elliott Associates, L.P.
("Elliott") is 712 Fifth Avenue, 36th Floor, New York, New
York 10019.
(6) Includes 47,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(7) Includes 3,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(8) Includes 5,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(9) Although Mr. Noda may be deemed to own beneficially the
securities owned by Pioneer, Mr. Noda has disclaimed
beneficial ownership of such securities. Includes 2,000
shares of Common Stock which are issuable (i) upon exercise
of presently exercisable options, warrants and rights and
(ii) upon exercise of options, warrants and rights that
become exercisable within 60 days of June 30, 1996.
(10) Although Mr. Koshiba may be deemed to own beneficially the
securities owned by Pioneer, Mr. Koshiba has disclaimed
beneficial ownership of such securities. Includes 2,000
shares of Common Stock which are issuable (i) upon exercise
of presently exercisable options, warrants and rights and
(ii) upon exercise of options, warrants and rights that
become exercisable within 60 days of June 30, 1996.
(11) Includes 3,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(12) Includes 1,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(13) Although Mr. Niijima may be deemed to own beneficially the
securities owned by Pioneer, Mr. Niijima has disclaimed
beneficial ownership of such securities. Includes 1,000
shares of Common Stock which are issuable (i) upon exercise
of presently exercisable options, warrants and rights and
(ii) upon exercise of options, warrants and rights that
become exercisable within 60 days of June 30, 1996.
(14) Although Mr. Nomura may be deemed to own beneficially the
securities owned by Pioneer, Mr. Nomura has disclaimed
beneficial ownership of such securities. Includes 2,500
shares of Common Stock which are issuable (i) upon exercise
of presently exercisable options, warrants and rights and
(ii) upon exercise of options, warrants and rights that
become exercisable within 60 days of June 30, 1996.
(15) Although Mr. Pierson may be deemed to own beneficially the
securities owned by Pioneer, Mr. Pierson has disclaimed
beneficial ownership of such securities. Includes 2,500
shares of Common Stock which are issuable (i) upon exercise
of presently exercisable options, warrants and rights and
(ii) upon exercise of options, warrants and rights that
become exercisable within 60 days of June 30, 1996.
(16) Includes 1,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996. Also includes 1,600 shares of Common
Stock which may be received upon the conversion (at $18.75
per share) of 3,000 shares of Outstanding Preferred Stock.
(17) Includes 6,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(18) Includes 7,000 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(19) Includes 5,700 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(20) Includes 1,800 shares of Common Stock which are issuable
(i) upon exercise of presently exercisable options,
warrants and rights and (ii) upon exercise of options,
warrants and rights that become exercisable within 60 days
of June 30, 1996.
(21) Includes shares of Common Stock which are issuable (i) upon
exercise of presently exercisable options, warrants and
rights and (ii) upon exercise of options, warrants and
rights that become exercisable within 60 days of June 30,
1996.
The following table sets forth, as of December 31, 1995,
the beneficial ownership of shares of the Company's Outstanding
Preferred Stock, by each stockholder who is known by the Company
to own more than 5% of the outstanding shares of the Outstanding
Preferred Stock based upon 4,200,000 shares of the Outstanding
Preferred Stock outstanding as of December 31, 1995. Although
6,000,000 shares of Outstanding Preferred Stock were originally
issued by the Company, LIVE purchased approximately 1,800,000
shares through December 1995, leaving approximately 4,200,000
shares outstanding as of that date. In addition, in March 1996,
the Company purchased 377,500 shares of the Outstanding
Preferred Stock at an average price of approximately $6.00 per
share.
BENEFICIAL OWNERSHIP OF OUTSTANDING PREFERRED STOCK
Shares of Percentage of
Name of Beneficial Series B Outstanding
Owner Preferred Series B
Stock Owned Preferred
Stock
Elliott Associates, L.P.(1) 414,485 9.9%
Metropolitan Life Insurance Company (2) 285,000 6.8%
(1) Elliott is a Delaware limited partnership and its principal
business is to purchase, sell, trade and invest in
securities. In its most recent Schedule 13D filed with the
Commission, Elliott claimed beneficial ownership over all
414,485 shares of Outstanding Preferred Stock owned by them
and indicated it has sole power to vote or direct the vote
of, and to dispose or direct the disposition of, the shares
owned. The address of Elliott is 712 Fifth Avenue, 36th
Floor, New York, New York 10019.
(2) Represents shares of Outstanding Preferred Stock indirectly
owned by Metropolitan Life Insurance Company ("Metropolitan")
through its wholly-owned subsidiary State Street Research &
Management Company ("State Street Research") and State Street
Research's affiliate State Street Research Investment
Services, Inc. ("State Street Services"). State Street
Research and State Street Services are investment advisers
registered under the Investment Advisers Act of 1940. In its
most recent Schedule 13G filed with the Commission,
Metropolitan claimed sole voting power and sole investment
power over all 285,000 shares of Outstanding Preferred Stock.
In their most recent Schedule 13G filed with the Commission,
State Street Research and State Street Services claimed that
various of their clients are the beneficial owners of all
285,000 shares of Outstanding Preferred Stock held by them
and State Street Research and State Street Services
disclaimed any beneficial interest in those securities. The
address of Metropolitan is One Madison Avenue, New York, New
York 10010. The address of State Street Research and State
Street Services is One Financial Center, Boston,
Massachusetts 02111-2690.
As of June 30, 1996, none of the Directors or executive officers
of the Company beneficially owned any shares of LIVE's Outstanding
Preferred Stock other than Mr. Yamarone, who owned 3,000 shares.
MARKET INFORMATION
Common Stock
Market Prices. On June 21, 1996, the Company's Common Stock
was listed with, and has since been traded on, the Nasdaq National
Market System ("Nasdaq/NMS") under the symbol "LIVE." Between
January 17, 1995 and June 20, 1996, the Company's Common stock was
traded on the Nasdaq Small Cap Market. From October 11, 1994
until January 17, 1995 the Company's Common Stock traded on the
over the counter market. Prior to that date the Company's Common
Stock was listed on the New York Stock Exchange. As of June 30,
1996, there were _______ holders of record of the Company's Common
Stock. As of the same date, 2,448,267 shares of the Company's
Common Stock were outstanding out of 24,000,000 shares authorized.
The following table sets forth for the periods indicated the
high and low sales prices for the Company's Common Stock on the
NYSE, as well as the high and low bid quotations for the Company's
Common Stock on the Nasdaq/NMS. The Nasdaq/NMS quotations reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
(Adjusted to reflect a 5:1 reverse stock split which occurred on
December 4, 1994.)
Year Ended December 31, 1993
Quarter Ended High Low
March 31, 1993 . . . . . . . . . . . . . . $14.375 $8.125
June 30, 1993. . . . . . . . . . . . . . . 11.875 8.125
September 30, 1993 . . . . . . . . . . . . 13.125 8.750
December 31, 1993. . . . . . . . . . . . . 14.375 8.750
Year Ended December 31, 1994
Quarter Ended High Low
March 31, 1994 . . . . . . . . . . . . . . $15.625 $11.875
June 30, 1994. . . . . . . . . . . . . . . 10.000 8.125
September 30, 1994 . . . . . . . . . . . . 8.125 6.250
December 31, 1994. . . . . . . . . . . . . 7.500 2.750
Year Ended December 31, 1995
Quarter Ended High Low
March 31, 1995 . . . . . . . . . . . . . . $ 4.000 $ 3.000
June 30, 1995. . . . . . . . . . . . . . . 5.000 3.500
September 30, 1995 . . . . . . . . . . . . 4.375 3.500
December 31, 1995. . . . . . . . . . . . . 4.625 2.375
Year Ended December 31, 1996
Quarter Ended High Low
March 31, 1996 . . . . . . . . . . . . . . $ 5.250 $ 2.750
June 30, 1996. . . . . . . . . . . . . . . 6.875 4.875
September 30, 1996 . . . . . . . . . . . . xxx.xx (1) xxx.xx
(1) Through August ___, 1996
Cash Dividends. The Company has never paid cash dividends
on its Common Stock, which in part has been due to debt
instrument restrictions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources." The Board of Directors
expects that it will continue to retain all earnings for use in
the Company's business except as required to be paid on any
outstanding series of preferred stock.
Outstanding Preferred Stock
Market Prices. On March 1, 1993, the Outstanding Preferred
Stock was issued and since that date has been listed with, and
traded on, the Nasdaq Small Cap Market. As of June 30, 1996,
there were 110 holders of record of the Outstanding Preferred
Stock. As of the same date, 3,819,802 shares of the Outstanding
Preferred Stock were outstanding out of 9,000,000 shares
authorized.
The following table sets forth for the periods indicated
the high and low sales prices for the Outstanding Preferred
Stock on the Nasdaq Small Cap Market.
Year Ended December 31, 1993
Quarter Ended High Low
March 31, 1993 . . . . . . . . . . . . . . $ 5.625 $ 5.625
June 30, 1993. . . . . . . . . . . . . . . 6.500 5.750
September 30, 1993 . . . . . . . . . . . . 6.500 6.125
December 31, 1993. . . . . . . . . . . . . 7.750 6.125
Year Ended December 31, 1994
Quarter Ended High Low
March 31, 1994 . . . . . . . . . . . . . . $ 7.6875 $ 7.500
June 30, 1994. . . . . . . . . . . . . . . 7.6875 7.500
September 30, 1994 . . . . . . . . . . . . 8.1875 7.750
December 31, 1994. . . . . . . . . . . . . 7.750 3.625
Year Ended December 31, 1995
Quarter Ended High Low
March 31, 1995 . . . . . . . . . . . . . . $ 4.6875 $ 3.750
June 30, 1995. . . . . . . . . . . . . . . 5.500 4.375
September 30, 1995 . . . . . . . . . . . . 7.00 5.250
December 31, 1995. . . . . . . . . . . . . 7.00 6.125
Year Ended December 31, 1996
Quarter Ended High Low
March 31, 1996 . . . . . . . . . . . . . . $ 7.125 $ 5.625
June 30, 1996. . . . . . . . . . . . . . . 8.500 6.750
September 30, 1996 . . . . . . . . . . . . xxxx.xx (1) xxx.xx
(1) Through August ___, 1996
Cash Dividends. Through June 30, 1996, the Company paid
quarterly cash dividends on the Outstanding Preferred. The
dividend rate on the Outstanding Preferred Stock increased to 10%
per annum from 5% per annum on May 1, 1996. If the Equity
Rationalization is not consummated, the Company expects that it
may no longer pay cash dividends on the Outstanding Preferred
Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital
Resources." However, if the Exchange Offer is consummated, the
Outstanding Preferred Stock will be amended to provide that no
dividends will be payable on the Outstanding Preferred Stock and
all accrued but unpaid dividends will be cancelled (see "Proposed
Amendments to Outstanding Preferred Stock").
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Arrangements with Members of the Compensation Committee or Their
Affiliates
See "Executive Compensation - Compensation Committee Interlocks
and Insider Participation," above. Also see "Business - Recent
Developments for the Company - New Distribution Agreements."
Employment and Consulting Agreements
Mr. Burlage is party to a December 1993 employment agreement
with LIVE which provides that he will serve as Chief Executive
Officer and President of LIVE from January 1994 until December
1997. Mr. Burlage's minimum salary was $450,000 per annum during
1994 and will be increased each calendar year thereafter by 5% of
the base salary in effect in the prior calendar year (or more at
the discretion of the Company's Board). Mr. Burlage's base salary
for 1995, as approved by the Company's Board, was $495,000. Mr.
Burlage will also receive incentive compensation equal to two
percent of the Company's earnings before interest and taxes in
excess of $10 million per annum, subject to certain exclusions,
limited to 100% of his base salary for the applicable year. As
part of the agreement, the Company paid Mr. Burlage a signing
bonus of $100,000 and agreed to pay for and/or provide a life
insurance policy, disability benefits, health insurance benefits,
automobile benefits, vacation benefits and a country club
membership. In addition, the Company granted Mr. Burlage options
to acquire 120,000 shares of the Company's Common Stock at a price
of $9.375 per share (the closing price of the Company's Common
Stock on the New York Stock Exchange on the date the Company and
Mr. Burlage reached agreement on his employment), with 30,000 of
such options originally vesting annually commencing December 31,
1994. Pursuant to a cancellation and reissuance plan offered to
all stock option holders on March 6, 1995, the above options were
canceled (the "Canceled Options") and Mr. Burlage received 120,000
new options ("New Options") under the following conditions; (i)
the exercise price for the New Options would equal $3.50, the
closing price of the Common Stock on The Nasdaq Stock Market's
SmallCap Market on March 6, 1995, (ii) fifty percent (50%) of the
New Options would vest on March 6, 1996; the remainder would vest
on March 6, 1997, provided that no New Options would vest earlier
than the scheduled vesting date for the corresponding Canceled
Options, and (iv) all New Options would expire on the expiration
date of the corresponding Canceled Options. LIVE also paid
approximately $11,000 in legal fees in 1994 incurred by Mr.
Burlage in connection with his employment agreement with LIVE. If
Mr. Burlage's employment is terminated by LIVE for other than
"good cause," he will receive his salary, incentive compensation,
life insurance, health insurance and automobile benefits for the
remainder of the term of his employment agreement. All payments
pursuant to the provisions of the immediately preceding sentence
would be reduced, dollar for dollar, by the amount received by Mr.
Burlage from employment following termination of his agreement.
Mr. Burlage and the Company are renegotiating his employment
agreement to be effective upon consummation of the Exchange Offer.
The new agreement is expected to include an extension of the
current term.
Mr. Cushey entered into a two-year employment agreement with
the Company effective December 31, 1994 and subsequently amended
it on December 31, 1995 to extend the term through December 31,
1997. Mr. Cushey is entitled to receive an annual base salary of
$210,000 and $220,000 during 1996 and 1997, respectively. The
agreement provides that Mr. Cushey will be eligible for a year-end
bonus, at the discretion of LIVE's management. If Mr. Cushey's
employment is terminated other than for cause, or in certain
instances of a change in ownership control (as defined in the
contract), he will be entitled to be paid the remaining balance of
his salary in accordance with its terms until he shall become
employed, in which case in certain circumstances he shall be paid
the difference (if less) between his new salary and his
compensation hereunder. Mr. Cushey received a total of 25,000
stock options under provisions of his employment contract and
amendment, 5,000 shares of such options are exercisable at $2.75
per share and 20,000 are exercisable at $3.50 per share over
various time periods to December 1998.
Mr. Mangel entered into a three year employment agreement with
LFM effective July 1, 1994. Mr. Mangel is entitled to receive an
annual base salary of $260,000 during the first year of the
agreement with annual increase of no less than 5%. His current
annual salary is $273,000. The agreement provides that Mr. Mangel
will be eligible for a year-end bonus, at the discretion of LIVE's
management and that premiums of a life insurance policy will be
paid by LFM on behalf of Mr. Mangel. If Mr. Mangel's employment
is terminated other than for cause, he will be entitled to be paid
the remaining balance of his salary in accordance with its terms
until he shall become employed, in which case in certain
circumstances he shall be paid the difference (if less) between
his new salary and his compensation hereunder.
Mr. Slutzky entered into a three-year employment agreement
with LFM effective on January 31, 1994 and expiring on December
31, 1997. Mr. Slutzky is entitled to an annual base salary of
$300,000 in 1996 and $310,000 in 1997. The agreement provides
that Mr. Slutzky will be eligible for a year-end bonus, at the
discretion of LIVE's management, and Mr. Slutzky also received
15,000 stock options at an exercise price of $3.50 per share under
the agreement. If Mr. Slutzky's employment is terminated other
than for cause, he will be entitled to be paid the remaining
balance of his salary in accordance with its terms until he shall
become employed, in which case in certain circumstances he shall
be paid the difference (if less) between his new salary and his
compensation hereunder.
Mr. Almond entered into a three-year employment agreement
effective January 20, 1994. Mr. Almond is entitled to receive an
annual base salary of $215,250 during each year of the agreement,
to be reviewed annually. His current annual base salary is
$205,000. The agreement provides that Mr. Almond will be eligible
for a year-end bonus, at the discretion of LIVE's management, and
Mr. Almond also received 12,000 stock options at an exercise price
of $3.50 per share under the agreement. If Mr. Almond's
employment is terminated other than for cause, he will be entitled
to be paid the remaining balance of his salary in accordance with
its terms until he shall become employed, in which case in certain
circumstances he shall be paid the difference (if less) between
his new salary and his compensation hereunder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal
income tax consequences of the transactions to be accomplished
pursuant to the Exchange Offer to a person who holds Outstanding
Preferred Stock or Common Stock at the time the Exchange Offer is
completed. This summary is based upon existing statutes, as well
as judicial and administrative interpretations thereof, all of
which are subject to change, including changes which may be
retroactive. No opinion of counsel or ruling from the Internal
Revenue Service ("IRS") will be requested by the Company on any
tax issue connected with the Exchange Offer. Accordingly, no
assurance can be given that the IRS will not challenge certain of
the tax positions described herein or that such a challenge would
not be successful.
The discussion below does not address the foreign, state or
local tax consequences of the transactions to be accomplished
pursuant to the Exchange Offer, nor does it specifically address
the tax consequences to taxpayers subject to special treatment
under the federal income tax laws (including dealers in
securities, foreign persons, life insurance companies, tax-exempt
organizations, financial institutions and taxpayers subject to the
alternative minimum tax). The discussion below assumes that the
Outstanding Preferred Stock is or will be held as a capital asset
within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended (the "Code") by Holders at the effective time of
the Exchange Offer. In the following discussion, the term
"should' is used to denote the more likely of possible
characterizations in situations where more than one
characterization is reasonably likely.
THE FOLLOWING SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
OF THE TRANSACTIONS TO BE ACCOMPLISHED PURSUANT TO THE EXCHANGE
OFFER IS NOT A SUBSTITUTE FOR OBTAINING INDIVIDUAL TAX ADVICE.
ACCORDINGLY, EACH HOLDER OF OUTSTANDING PREFERRED STOCK, COMMON
STOCK AND SERIES C PREFERRED STOCK IS URGED TO CONSULT HIS OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE EXCHANGE OFFER.
Federal Income Tax Consequences to Holders of Outstanding
Preferred Stock
The Exchange Offer should be treated as a "recapitalization"
of the Company within the meaning of Code Section 368(a)(1)(E).
As a result of this characterization, the Exchange Offer should
have the tax consequences described below.
Except as discussed below with respect to the receipt of cash
in lieu of fractional shares of Common Stock, Holders of
Outstanding Preferred Stock who participate in the Exchange Offer
and elect to receive the Cash and Common Stock Consideration
should recognize their gain (but not loss) but only to the extent
of the cash consideration received. Generally, a Holder's gain
will be equal to the excess (if any) of (a) the sum of (i) the
amount of cash consideration received and (ii) the fair market
value of the Common Stock received, over (b) the Holder's adjusted
tax basis in the Outstanding Preferred Stock exchanged. Any gain
recognized as a result of the Exchange Offer should be capital
gain.
Holders of Outstanding Preferred Stock who participate in the
Exchange Offer and elect to receive the Common Stock Consideration
should not recognize any gain or loss (except to the extent such
Holders receive cash in lieu of fractional shares, discussed
below).
The tax basis of the Common Stock (including any fractional
shares) received by a Holder pursuant to the Exchange Offer should
be equal to such Holder's adjusted tax basis in the Outstanding
Preferred Stock transferred in exchange therefor, decreased by the
amount of cash consideration received and increased by the amount
of gain (if any) recognized. The holding period of the Common
Stock received should include the period during which the Holder
held the Outstanding Preferred Stock exchanged therefor.
Cash received by a Holder of Outstanding Preferred Stock in
lieu of fractional shares of Common Stock should be treated as if
the fractional shares had been issued to such Holder and then
redeemed for cash by the Company, resulting in capital gain (or
loss) in an amount equal to the extent such Holder's tax basis in
the fractional shares is less (or greater) than the amount of cash
received in exchange therefor.
Holders of Outstanding Preferred Stock who do not participate
in the Exchange Offer should not recognize any gain or loss as a
result of other Holders of Outstanding Preferred Stock
participating in the Exchange Offer.
Federal Income Tax Consequences to Holders of Common Stock
Holders of Common Stock should not recognize any gain or loss
as a result of Holders of Outstanding Preferred Stock
participating in the Exchange Offer.
Federal Income Tax Consequences to Company
As the result of Holders of Outstanding Preferred Stock
participating in the Exchange Offer and holders of the outstanding
Series C Preferred Stock participating in the Series C Exchange
Offer, (a) the Company should not recognize any gain or loss and
(b) the Company's use of its net operating losses and certain
other tax attribute carryovers and certain built-in losses should
not be affected.
Backup Withholding and Reporting
Holders of Outstanding Preferred Stock who participate in the
Exchange Offer may be subject to backup withholding at the rate of
31% with respect to "reportable payments" which include dividends
paid on, or the proceeds of a sale, exchange or redemption of
stock (such amounts should include any cash received in lieu of
fractional shares and the cash portion of the consideration
received pursuant to the Exchange Offer). The payor will be
required to deduct and withhold the prescribed amounts if (a) the
payee fails to furnish a taxpayer identification number ("TIN") to
the payor in the manner required, (b) the IRS notifies the payor
that the TIN furnished by the payee is incorrect, (c) there has
been a "notified payee underreporting" described in Code Section
3406(c), or (d) there has been a failure of the payee to certify
under penalty of perjury that the payee is not subject to
withholding under Code Section 3406(a)(1)(C). In general, if any
one of the events listed above occurs, the Company may be required
to withhold at a rate of 31%. Amounts paid as backup withholding
do not constitute an additional tax and will be credited against
the Holder's federal income tax liabilities, so long as the
required information is provided to the IRS. The Company will
report to the Holders and to the IRS the amount of any "reportable
payments" for each calendar year and the amount of tax withheld,
if any, with respect to payment on the securities.
PROCEDURE FOR TENDERING OUTSTANDING PREFERRED STOCK AND GIVING
PREFERRED STOCK CONSENTS
The acceptance by a Holder of the Exchange Offer pursuant to
one of the procedures set forth below will constitute an agreement
between the Holder and the Company in accordance with the terms
and subject to the conditions set forth in this Prospectus and in
the Letter of Transmittal.
For a Holder validly to tender Outstanding Preferred Stock
pursuant to the Exchange Offer, the Holder must either (i) deliver
the Outstanding Preferred Stock, together with a properly
completed and duly executed Letter of Transmittal or facsimile
thereof and any other documents required by the Letter of
Transmittal, to the Exchange Agent at the address set forth below
under "-Exchange Agent" on or prior to the Expiration Date, or
(ii) comply with the guaranteed delivery procedures set forth
below.
Nominees or other record holders of Outstanding Preferred
Stock that hold Outstanding Preferred Stock for more than one
beneficial owner are entitled to make multiple elections pursuant
to the Letter of Transmittal that reflect the election of each of
the beneficial owners for whom they are tendering Outstanding
Preferred Stock. In order to make such multiple elections,
nominees or other record holders should properly complete the
table under the box entitled "Election on Behalf of Multiple
Beneficial Owners."
NO LETTERS OF TRANSMITTAL AND NO OUTSTANDING PREFERRED STOCK
SHOULD BE SENT TO THE COMPANY.
All signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by an Eligible
Institution unless the Outstanding Preferred Stock tendered
pursuant thereto are tendered (i) by a Record Holder who has not
completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the relevant Letter of
Transmittal or (ii) for the account of an Eligible Institution.
If Outstanding Preferred Stock is registered in the name of a
person other than the signer of a Letter of Transmittal or a
notice of withdrawal, as the case may be, then the Outstanding
Preferred Stock must be endorsed by the Record Holder, or be
accompanied by a written instrument or instruments of transfer or
exchange in form satisfactory to the Company duly executed by the
Record Holder, and in the case of a Letter of Transmittal must
also be accompanied by a properly completed form of consent from
such Record Holder with respect to the Proposed Amendments (unless
this requirement is waived by the Company or unless the Company
has otherwise received the Requisite Acceptances) and with
signature guaranteed by an Eligible Institution. If signatures on
a Letter of Transmittal are required to be guaranteed, such
guarantees must be by a member firm of a registered national
securities exchange, a member of the National Association of
Securities Dealers, Inc., by a commercial bank or trust company
having an office in the United States, a credit union, or a
savings association (each of which is an "Eligible Institution").
The method of delivery of Outstanding Preferred Stock and all
other required documents to the Exchange Agent is at the election
and risk of the Holder tendering Outstanding Preferred Stock, but,
if sent by mail, registered mail with return receipt requested,
properly insured, is recommended.
Unless the shares of Outstanding Preferred Stock being
tendered are deposited with the Exchange Agent prior to the
relevant Expiration Date (accompanied by a properly completed
Letter of Transmittal and any other documents required by the
Letter of Transmittal), or tendered pursuant to the guaranteed
delivery procedures set forth below, the Company may, at its
option, reject such tender. Issuance of Common Stock in exchange
for Outstanding Preferred Stock will be made only against deposit
of the tendered Outstanding Preferred Stock. If less than all the
shares of Outstanding Preferred Stock evidenced by a submitted
certificate are tendered, the tendering Holder should fill in the
number of shares tendered in the appropriate box on the relevant
Letter of Transmittal with respect to the deposit being made, but
only to the extent of the principal shares of Outstanding
Preferred Stock being tendered. The Exchange Agent will then
return to the tendering holder (unless otherwise requested by the
Holder under "Special Delivery Instructions" in the relevant
Letter of Transmittal), as promptly as practicable following the
Expiration Date, the number of shares of Amended Outstanding
Preferred Stock equal to the shares of such delivered Outstanding
Preferred Stock not tendered. All shares represented by any
certificate for Outstanding Preferred Stock deposited with the
Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Holders who are not Record Holders of, and who seek to tender,
Outstanding Preferred Stock should (i) obtain a properly completed
Letter of Transmittal from the Record Holder with signatures
guaranteed by an Eligible Institution, or (ii) obtain and include
with the relevant Letter of Transmittal Outstanding Preferred
Stock properly endorsed for transfer by the registered holder or
accompanied by a properly completed stock power from the Record
Holder, together with a properly completed form of consent from
such Record Holder with respect to the Proposed Amendments, with
signatures on the endorsement or power and on the consent
guaranteed by an Eligible Institution or (iii) effect a record
transfer of such Outstanding Preferred Stock and comply with the
requirements applicable to Record Holders for tendering
Outstanding Preferred Stock prior to the Expiration Date. Any
Outstanding Preferred Stock properly tendered prior to the
Expiration Date accompanied by a properly completed Letter of
Transmittal will be transferred of record by the transfer agent
either prior to or as of the Expiration Date at the discretion of
the Company. The Company has no obligation to transfer any
Outstanding Preferred Stock from the name of the Record Holder
thereof if the Company does not accept for exchange any of such
Outstanding Preferred Stock.
Holders who do not tender their Outstanding Preferred Stock
and who wish to consent to the Proposed Amendments should complete
the applicable Letter of Transmittal (which will serve as the form
of consent) in accordance with the instructions thereto and return
it promptly to the Exchange Agent, who will transmit it to the
Company. The Company will not accept for exchange any Outstanding
Preferred Stock if the Holder thereof has not granted the
Preferred Stock Consent relating thereto.
If a Holder desires to tender Outstanding Preferred Stock
pursuant to the Exchange Offer but is unable to locate the
Outstanding Preferred Stock to be tendered, such Holder should
write to or telephone American Stock Transfer & Trust Company, 99
Wall Street, New York, New York, telephone 212/936-5100, about
procedures for obtaining replacement certificates for Outstanding
Preferred Stock or arranging for indemnification.
Each tendering Holder must complete the Substitute Form W-9
provided in the relevant Letter of Transmittal and either (i)
provide his correct taxpayer identification number (social
security number, for individuals) and certify that the taxpayer
identification number provided is correct (or that such holder is
awaiting a taxpayer identification number) and that (A) the holder
has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all
interest or dividends or (B) the Internal Revenue Service has
notified the holder that he is no longer subject to backup
withholding or (ii) provide an adequate basis for exemption from
backup withholding. Holders who do not satisfy these conditions
may be subject to a $50 (or greater) penalty imposed by the
Internal Revenue Service and may be subject to backup withholding
(as discussed below). Exempt holders (including, among others,
corporations and certain foreign individuals) are not subject to
these requirements if they satisfactorily establish their status
as such. Certain foreign Holders may be required to provide a
Form W-8 or Form 1001 in order to avoid or reduce withholding tax.
By tendering Outstanding Preferred Stock pursuant to the
Exchange Offer, a Holder that does not comply with the conditions
described in the preceding paragraph authorizes the Exchange
Agent, the Company or its paying agents, as the case may be, to
withhold cash or sell Common Stock withheld in an amount
sufficient to enable it to satisfy its backup or other withholding
obligations.
Pursuant to the backup withholding provisions of federal
income tax law, unless the conditions described above are
satisfied, the Exchange Agent, the Company or their paying agents,
as the case may be, will withhold (i) an amount of any cash
proceeds payable to a tendering Holder pursuant to the Exchange
Offer, and (ii) and any Common Stock such that the sum of such
cash and Common Stock withheld will enable the Exchange Agent, the
Company or its paying agents, as the case may be, after selling
such Common Stock so withheld, to remit the appropriate amount of
backup withholding due to the Internal Revenue Service with
respect to such exchange. Upon any such sale, the Exchange Agent,
the Company or its paying agents, as the case may be, will be
entitled to seek reimbursement for the costs, fees or expenses of
such sale incurred by it. Alternatively, the Exchange Agent, the
Company or their paying agents, as the case may be, may require
such a Holder to remit a payment (in cash or certified check)
sufficient to cover the Holder's backup withholding tax liability
prior to the release of any cash or Common Stock withheld from
such Holder. Any Common Stock sold pursuant to this paragraph
shall be treated for tax reporting purposes as if it was delivered
to the exchanging Holder and sold on its behalf. Backup
withholding is applied at a 31% rate. Amounts paid as backup
withholding do not constitute an additional tax and generally will
be credited against the Holder's federal income tax liabilities.
Different withholding rates and rules may apply in the case of
certain foreign Holders.
All questions as to the form of all documents and the validity
(including time of receipt), eligibility, acceptance and
withdrawal of tendered shares of Outstanding Preferred Stock will
be determined by the Company, in its sole discretion, which
determination shall be final and binding. The Company reserves
the absolute right to reject any and all tenders not in proper
form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the
absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer (other than the condition that
the registration statement for the Common Stock and the Amended
Outstanding Preferred Stock shall be effective and no stop order
shall be issued by the Commission with respect thereto, which
condition may not be waived by the Company) or any defect or
irregularity in the tender of any of the Outstanding Preferred
Stock; provided that the Company will not waive the Requisite
Acceptance Conditions with respect to the Exchange Offer without
making a public announcement thereof and permitting the withdrawal
of Outstanding Preferred Stock tendered pursuant to the Exchange
Offer for a period of five business days following such public
announcement. Neither the Company, the Exchange Agent, the
Information Agent nor any other person will be under any duty to
give notification of any defects or irregularities in tenders or
will incur any liability for failure to give any such
notification. Any shares of Outstanding Preferred Stock received
by the Exchange Agent that are not properly tendered and as to
which irregularities have not been cured or waived will be
returned by the Exchange Agent to the appropriate tendering Holder
as soon as practicable. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letters of
Transmittal and the Instructions thereto) will be final and
binding on all parties.
Guaranteed Delivery Procedures
If a Holder desires to tender shares of Outstanding Preferred
Stock and the Holder's Outstanding Preferred Stock are not
immediately available or time will not permit the Holder's
Outstanding Preferred Stock or other required documents to reach
the Exchange Agent before the Expiration Date, a tender may be
effected if:
(a) the tender is made through an Eligible Institution;
and
(b) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed
Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery) substantially in the
form provided by the Company which (i) (A) includes the duly
executed consent of the Record Holder of the tendered
Outstanding Preferred Stock or (B) is accompanied by such a
consent (unless in either case the Company has otherwise
received the Requisite Acceptances) and (ii) sets forth the
name and address of the Holder and the number of shares of
Outstanding Preferred Stock tendered, states that the tender
is being made thereby and guarantees that within five Nasdaq
National Market trading days after the Expiration Date, the
relevant Letter of Transmittal (or facsimile thereof)
together with the shares of Outstanding Preferred Stock and
any other documents required by such Letter of Transmittal,
will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) all tendered shares of Outstanding Preferred Stock,
as well as all other documents required by the relevant
Letter of Transmittal, shall be received by the Exchange
Agent within five Nasdaq National Market trading days after
the Expiration Date.
A consent to the Proposed Amendments delivered in connection
with a Notice of Guaranteed Delivery will be effective upon
receipt thereof by the Exchange Agent regardless of whether or
when the certificates for the tendered shares of Outstanding
Preferred Stock, an executed Letter of Transmittal and the other
required documents are received.
Acceptance of Outstanding Preferred Stock and Payment
The acceptance for exchange and payment of Outstanding
Preferred Stock validly tendered and not withdrawn and delivery of
the Common Stock and, if applicable, payment of cash will be made
as promptly as practicable after the Expiration Date. The
Company, however, expressly reserves the right to delay acceptance
of any of the Outstanding Preferred Stock or terminate the
Exchange Offer and not accept for exchange any Outstanding
Preferred Stock not theretofore accepted if any of the conditions
set forth under "Conditions of the Exchange Offer" shall not have
been satisfied or waived by the Company. For purposes of the
Exchange Offer, the Company will be deemed to have accepted for
exchange validly tendered shares of Outstanding Preferred Stock
if, as and when the Company gives oral or written notice thereof
to the Exchange Agent. Subject to the terms and conditions of the
Exchange Offer, delivery of shares of Common Stock and, if
applicable, payment of cash for shares of Outstanding Preferred
Stock accepted pursuant to the Exchange Offer, will be made by the
Exchange Agent as soon as practicable after receipt of such
notice. The Exchange Agent will act as agent for the tendering
Holders for the purposes of receiving Common Stock from the
Company and transmitting the Common Stock and cash to the
tendering Holders. Tendered Outstanding Preferred Stock not
accepted for exchange by the Company, if any, will be returned
without expense to the tendering Holder as promptly as practicable
following the Expiration Date.
All tendering Holders, by execution of the Letter of
Transmittal (or facsimile thereof), waive any right to receive
notice of acceptance of their Outstanding Preferred Stock for
exchange.
Withdrawal Rights
Tenders of Outstanding Preferred Stock are irrevocable, except
that tendered Outstanding Preferred Stock may be withdrawn (a) at
any time prior to 5:00 p.m., New York City time, on [______],
[______], 1996 and (b) if applicable, for a period of five
business days following public announcement of a waiver of the
Requisite Acceptance condition in respect of the Exchange Offer.
Tendered Outstanding Preferred Stock may also be withdrawn at any
time after forty business days after the Commencement Date of the
Exchange Offer. Holders who wish to exercise their right of
withdrawal must give notice of withdrawal in writing or by
telegram, telex or facsimile transmission, which notice must be
timely received by the Exchange Agent at one of its addresses set
forth on the back cover page of this Prospectus. Any such notice
of withdrawal must specify the name of the person who tendered the
shares of Outstanding Preferred Stock to be withdrawn and the
number of shares of Outstanding Preferred Stock to be withdrawn.
If Outstanding Preferred Stock has been delivered or otherwise
identified to the Exchange Agent, the name of the registered
holder and the serial numbers of the particular Outstanding
Preferred Stock to be so withdrawn must also be furnished to the
Exchange Agent prior to the physical release of the withdrawn
Outstanding Preferred Stock. Such notice of withdrawal must be
signed by the Record Holder in the same manner as the original
signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory
to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Outstanding Preferred
Stock.
Any permitted withdrawals of tenders of Outstanding Preferred
Stock may not be rescinded, and any shares of Outstanding
Preferred Stock withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; however, withdrawn
Outstanding Preferred Stock may be re-tendered by following one of
the procedures described herein at any time on or prior to the
Expiration Date. Withdrawal of Outstanding Preferred Stock will
not effect revocation of a consent. See "-Revocation of Consents;
Defective Tender" below.
All questions as to validity, form and eligibility (including
time of receipt) of the notice of withdrawal will be determined by
the Company in its sole discretion, which determination will be
final and binding. None of the Company, the Exchange Agent, the
Information Agent, or any other person will be under any duty to
give notification of any defects or irregularities in any notice
of withdrawal or will incur any liability for failure to give any
such notification.
Revocation of Consents; Defective Tenders
Any Record Holder of Outstanding Preferred Stock who has
delivered a Preferred Stock Consent to the Proposed Amendments may
effectively revoke such consent by filing written notice with the
Company at any time prior to (but not after) the date and time of
delivery of the Requisite Acceptances effecting the Proposed
Amendments with respect to the Outstanding Preferred Stock. Any
holder who succeeds a Record Holder of Outstanding Preferred Stock
may revoke a previously delivered a Preferred Stock Consent of the
previous Record Holder only if such subsequent holder has a valid
proxy from such previous holder.
However, if a Record Holder effects a valid revocation of
Preferred Stock Consent to the Proposed Amendments with respect to
tendered shares of Outstanding Preferred Stock, such action will
render the prior tender of such Outstanding Preferred Stock
defective, and the Company will have the right, which it may
waive, to reject such tender as invalid and ineffective. The
Company reserves the right to contest the validity of any such
revocations. A purported notice of revocation which is not
received by the Exchange Agent in a timely fashion will not be
effective to revoke a Preferred Stock Consent previously given.
Exchange Agent
American Stock Transfer & Trust Company will act as Exchange
Agent for the Exchange Offer. All correspondence in connection
with the Exchange Offer and the Letters of Transmittal should be
addressed to the Exchange Agent as follows:
By Mail, Hand By Facsimile:
or Overnight Courier: (718) 234-5001
40 Wall Street
New York, New York 10005 Telephone:
Attention: Henry Reinhold (718) 921-8200
Information Agent
The Carreden Group Incorporated has been appointed as
Information Agent for the Exchange Offer. All inquiries
relating to the Exchange Offer should be directed to the
Information Agent at the address and telephone number set forth
below.
By Mail, Hand or By Facsimile:
Overnight Courier: (212) 332-1313
Carreden Group Incorporated
610 Fifth Avenue, Rockefeller Center Telephone:
New York, New York 10020 (800) XXX-XXXX
Attention: Fred Ermel
Joe Huertas
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of the Company consists of
54,000,000 shares, of which 24,000,000 shares are Common Stock,
par value $.01 per share, 15,000,000 shares are Series A Common
Stock, par value $.01 per share (which stock will be eliminated as
part of the amendments to the Restated Certificate of
Incorporation), and 15,000,000 shares are Series Preferred Stock,
par value $1.00 per share. The Board of Directors of the Company
has authority, without further action by the holders of the
Company's Common Stock to divide the Series Preferred Stock into
series, to fix the number of shares constituting a series and to
fix or alter the voting rights, dividend rights, dividend rates,
conversion rights, rights and terms of redemption, rights upon
dissolution or liquidation and other special rights,
qualifications, limitations or restrictions on any unissued shares
of Series Preferred Stock, which could adversely affect the voting
power of the holders of Common Stock.
Prior to the consummation of the Equity Rationalization, there
are 9,000,000 shares of Outstanding Preferred Stock authorized and
3,819,802 shares issued. In addition, 500,000 shares of Series
Preferred Stock have been authorized and designated as Series R
Junior Participating Cumulative Preferred Stock (the "Series R
Preferred Stock") and reserved for issuance in connection with a
Rights Agreement, dated as of July 19, 1990, as amended, (the
"Rights Agreement"), between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Upon consummation of the Equity Rationalization and, if the
holders of Common Stock approve the Certificate of Amendment to
Restated Certificate of Incorporation of the Company, the
authorized capital stock of the Company will consist of 54,000,000
shares, of which (i) 39,000,000 shares will be Common Stock,
(ii) 500,000 shares will be Series R Preferred Stock, (iii) an
undetermined amount will be Amended Outstanding Preferred Stock
(Amended Outstanding Preferred Stock), but no more than 1,909,900
shares, and (iv) the remainder will be Series Preferred Stock.
Set forth below is a description of the Common Stock, the
Series R Preferred Stock and the Series C Preferred Stock. The
descriptions below are summaries and are subject to the detailed
provisions of the Restated Certificate of Incorporation (and, if
approved, the Certificate of Amendment to Restated Certificate of
Incorporation) and Bylaws of the Company, do not purport to be
complete and are qualified in their entirety by reference thereto.
For a description of the Outstanding Preferred Stock (Series B),
see "Description of Outstanding Preferred Stock," of the Amended
Outstanding Preferred Stock, see "Proposed Amendments to
Outstanding Preferred Stock."
Common Stock
Voting Rights. Holders of Common Stock are entitled to one
vote per share on any matter coming before the stockholders for a
vote. The Common Stock does not have cumulative voting, which
means that holders of more than 50% of the shares (voting as a
single class with the Series A Common Stock) can elect all
Directors. The holders of the Series C Preferred Stock are
entitled to vote with the Common Stock and Series A Common Stock
on an as converted basis.
Dividend and Liquidation Rights. The holders of Common Stock
are entitled to share (together with the holders of Series A
Common Stock) pro rata in such dividends as may be declared by the
Board of Directors out of funds legally available for that
purpose. See "Market Price of and Dividends on the Company's
Securities-Common Stock-Dividends," "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources," "Description of New Notes-Restrictive Covenants."
Subject to the prior rights of creditors and holders of
preferred stock with a preference in liquidation, the holders of
Common Stock (together with the holders of Series A Common Stock)
are entitled, in the event of liquidation of the Company, to
participate ratably in the distribution of all remaining assets of
the Company.
The Company's Restated Certificate of Incorporation and Bylaws
contain various provisions which may have the effect of
discouraging future takeover attempts and of perpetuating the
Company's existing management, which the Company's stockholders
may deem to be not in their best interest. Among other things,
such provisions (i) provide the Board of Directors with the broad
discretion to issue series of preferred stock; (ii) establish
three classes of Directors with staggered terms of election;
(iii) in certain circumstances and except where a majority of the
Company's independent Directors have otherwise approved, require
the approval of 66-2/3% of all shares eligible to vote for certain
business combinations involving a stockholder owning more than 20%
of the Company's voting securities; and (iv) require the approval
of 66-2/3% of all shares eligible to vote for any proposed
amendment to the provisions discussed in clauses (ii) or (iii)
above.
General. No holder of Common Stock has any preemptive rights
to subscribe for any securities of the Company. The Company's
Restated Certificate of Incorporation does not (and, if approved,
the Certificate of Amendment to Restated Certificate of
Incorporation will not) provide for any redemption, sinking fund
or similar rights for the Common Stock.
The Company's Restated Certificate of Incorporation provides
for the elimination of personal liability of Directors of the
Company for breach of fiduciary duty, except liability for such
matters as (i) a breach of the Director's duty of loyalty to the
Company or its stockholders, (ii) acts or omissions by the
Director not in good faith or which involve misconduct or a
knowing violation of law and (iii) transactions from which the
Director derived an improper personal benefit. Insofar as
indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
All outstanding shares of Common Stock are, and shares of
Common Stock to be issued upon conversion of other Outstanding
Preferred Stock of the Company will be, fully paid and non-assessable.
The Transfer Agent for the Common Stock is American Stock
Transfer & Trust Company.
Series R Preferred Stock
On July 19, 1990, as subsequently amended, the Board of
Directors of the Company adopted a Stockholder Rights Plan
pursuant to which the Company entered into the Rights Agreement.
The Company also declared a dividend to holders of record of
Common Stock on August 1, 1990 of one preferred stock purchase
right (a "Right") for each share of Common Stock outstanding as of
such date. Certificates evidencing the Rights will only be
distributed upon the occurrence of a Distribution Date as
described below. Until such time, the Rights are attached to
Common Stock, trade with the LIVE Common Stock, and are not
separately tradeable.
Distribution of Rights. Upon the Distribution Date,
certificates evidencing the Rights will be distributed, the Rights
may trade separately from the shares of Common Stock and the
Rights will be exercisable at an exercise price of $90, subject to
adjustment (the "Exercise Price"). The "Distribution Date" is the
earliest of (a) the tenth business day following the date of the
first public announcement that any person (other than (i) the
Company, any subsidiary of the Company, any employee benefit plan
of the Company or any subsidiary of the Company, or (ii) Pioneer
or any affiliate or associate of Pioneer, or (iii) any person who
has secured required board approval) has become the beneficial
owner of 20% (or such lower threshold not less than 10% as may be
established by the Board of Directors) or more of the then
outstanding shares of Common Stock (regardless of the threshold
percentage established by the Board of Directors, such person is
designated a "20% Stockholder" and the date of such public
announcement is the "20% Ownership Date"), (b) the tenth business
day (or such later day as shall be designated by a majority, but
not less than three, of the Independent Directors as defined in
the Rights Agreement) following the date of the commencement of,
or the announcement of an intention to make, a tender offer or
exchange, the consummation of which would cause any person to
become a 20% Stockholder (other than the Company, any subsidiary
of the Company, any employee benefit plan of the Company or any
subsidiary of the Company, Pioneer or any affiliate or associate
of Pioneer, or any person approved by the Board) or (c) the first
date, on or after the 20% Ownership Date, upon which the Company
is acquired in a merger or other business combination in which the
Company is not the surviving corporation or in which the
outstanding shares of Common Stock are changed into or exchanged
for stock or assets of another person, or upon which 50% or more
of the Company's consolidated assets or earning power are sold
(other than in transactions in the ordinary course of business).
In calculating the percentage of outstanding shares of Common
Stock that are beneficially owned by any person, such person shall
be deemed to beneficially own any shares of Common Stock issuable
upon the exercise, exchange or conversion of any options, warrants
or other securities beneficially owned by such person; provided,
however that such Common Stock shall not be deemed outstanding for
the purpose of calculating the percentage of shares of Common
Stock that are beneficially owned by any other person.
Notwithstanding the foregoing, if any person is a 20% Stockholder
on the date of the Rights Agreement, or thereafter becomes a
beneficial owner of at least 20% of the outstanding shares of
Common Stock as a result of any decrease in the number of
outstanding Common Shares resulting from any stock repurchase plan
or self-tender offer of the Company, then such person shall not be
deemed a "20% Stockholder" until such person thereafter acquires
beneficial ownership of, in the aggregate, a number of additional
shares of Common Stock equal to 1% or more of the then outstanding
shares of Common Stock.
Upon the close of business on the Distribution Date, the
Rights shall separate from the shares of Common Stock, Rights
certificates shall be issued and the Rights shall become
exercisable to purchase shares of Common Stock or Series R
Preferred Stock as described below.
Exercise of Rights. Once exercisable, each Right entitles the
holder thereof: (a) to purchase one one-hundredth of a newly
issued share of Series R Preferred Stock, (b) from and after the
close of business on the tenth business day following a 20%
Ownership Date, to purchase, upon payment of the product of the
Exercise Price multiplied by the number of one one-hundredths of
shares of Series R Preferred Stock for which a Right was then
exercisable, the number of shares of Common Stock having a market
value of two times the Exercise Price, or (c) in the event of a
20% Ownership Date and upon the occurrence of certain mergers or
sales of assets by the Company, to purchase, upon payment of the
product of the Exercise Price multiplied by the number of one
one-hundredths of shares of Series R Preferred Stock for which a Right
was then exercisable, the number of shares of common stock of the
surviving corporation or purchaser (so long as it is not the
Company) having a market value of two times the Exercise Price.
Redemption, Exchange and Expiration. A majority, but not less
than three, of the Independent Directors of the Company may direct
the Company to redeem all outstanding Rights at a redemption price
of $.01 per Right, as adjusted, at any time prior to (i) the tenth
business day after a 20% Ownership Date or (ii) the first date, on
or after a 20% Ownership Date, that certain mergers or sales of
assets by the Company occur. A majority, but not less than three,
of the Independent Directors of the Company may (i) direct the
Company to exchange all outstanding Rights for shares of Common
Stock at a ratio of one share of Common Stock per Right exchanged
at any time after a 20% Ownership Date but before such time as a
20% Stockholder of Common Stock becomes the beneficial owner of
50% or more of the Common Stock outstanding and (ii) under certain
circumstances, reduce the 20% share acquisition triggering level
to not less than 10%. The Rights expire on July 19, 2000, unless
sooner redeemed or exchanged by the Company.
The Rights have certain anti-takeover effects. Exercise of
the Rights may substantially dilute the ownership interest in the
Company of a person or group (other than Exempt Person) that
attempts to acquire the Company on terms not approved by the Board
of Directors of the Company, unless such person conditions its
offer on a substantial number of Rights being acquired.
Five hundred thousand shares of preferred stock, par value
$1.00 per share, have been designated as Series R Preferred Stock.
The following is a summary of certain terms of the Series R
Preferred Stock:
Dividends. Each holder of Series R Preferred Stock in
preference to the holders of the Company's Common Stock and of any
other junior stock of the Company will be entitled to receive
dividends on January 10, April 10, July 10 and October 10 of each
year ("Dividend Payment Date") in an amount per share equal to the
greater of (i) $.25 per share ($1.00 per annum) or (ii) 100 times
the aggregate per share amount of all dividends or other
distributions (other than dividends payable in shares of Common
Stock) declared on the Common Stock since the last Dividend
Payment Date, subject to adjustment. All dividends accrue from
the beginning of each quarterly dividend period (with certain
exceptions for the quarterly period in which the Series R
Preferred Stock is first issued depending upon when during such
period the Series R Preferred Stock is issued). Accrued but
unpaid dividends will cumulate but will not bear interest. While
dividends or other distributions payable on the Series R Preferred
Stock are in arrears, the Company may not declare or pay dividends
on, or make any distributions with respect to, any shares of stock
ranking junior to or pari passu with the Series R Preferred Stock.
In addition, while such dividends or distributions are in arrears,
the Company may not, and may not permit any subsidiary to (i)
redeem or acquire for consideration any shares of stock of the
Company ranking junior to the Series R Preferred Stock, except in
exchange for shares of stock of the Company ranking junior to the
Series R Preferred Stock, or (ii) purchase or acquire for
consideration any Series R Preferred Stock or any shares of stock
of the Company ranking pari passu with the Series R Preferred
Stock, except pursuant to a purchase offer made in writing or by
publication to the holders of the shares to be purchased.
Ranking. With respect to the rights to receive (i) dividends
and (ii) distributions upon the liquidation, dissolution or
winding-up of the Company, the Series R Preferred Stock will rank
senior to the Company Common Stock and junior to all other series
of preferred stock of the Company unless otherwise provided in the
Restated Certificate of Incorporation of the Company or a
Certificate of Designations relating to a subsequent series of
preferred stock.
Liquidation Value. Securities ranking junior to the Series
R Preferred Stock are not eligible to receive any distribution
upon the liquidation, dissolution or winding-up of the Company
until the holders of the Series R Preferred Stock have received
the greater of (i) $1.00 per share plus an amount equal to all
accrued and unpaid dividends, subject to adjustment, or (ii) an
aggregate amount per share, subject to adjustment, equal to 100
times the aggregate amount to be distributed per share to holders
of shares of the Company's Common Stock. Securities ranking pari
passu with Series R Preferred Stock may only receive distributions
made ratably with the Series R Preferred Stock in proportion to
the total amounts to which the holders of all such shares are
entitled upon the liquidation, dissolution or winding-up of the
Company.
Voting Rights. Each share of Series R Preferred Stock
entitles its holder to cast 100 votes (subject to adjustment) on
all matters submitted to a vote of the holders of the Company
Common Stock. The Series R Preferred Stock will vote as a class
with the Common Stock. In the event that the Company does not pay
or declare dividends or set aside an amount sufficient for payment
of dividends for six quarters, whether consecutive or not (a
"Dividend Default"), special voting rights will apply to the
holders of the Series R Preferred Stock and certain other
designated holders (the "Other Holders"). Such special voting
rights include, but are not limited to, the ability of the holders
of the Series R Preferred Stock and the Other Holders to vote
separately as a class and to elect three directors at the
Company's annual meeting or at a special meeting called by such
holders in addition to the directors to be elected by all shares
entitled to vote. When the Dividend Default is cured, the term of
office of such directors so elected will terminate.
Redemption Rights. The Series R Preferred Stock is not
redeemable but may be acquired by the Company in any other manner
permitted by law or the Restated Certificate of Incorporation.
Series C Preferred Stock
The following is a summary of the rights and preferences of
the Series C Preferred Stock as contained in the Certificate of
Designations, Preferences and Rights of Series C Convertible
Preferred Stock (the "Pioneer Certificate of Designations"). The
Series C Preferred Stock was issued to Pioneer in 1993 and will
cease to be outstanding if the Series C Exchange Offer is
consummated.
Dividends. The holders of record of the Series C Preferred
Stock are entitled to receive, when and as declared by the Board
of Directors of the Company, out of any funds legally available
therefor, cumulative dividends payable in cash at the semi-annual
rate of 2.5% of the Liquidation Preference (as defined below) for
each of the semi-annual payment periods ending on June 30 and
December 31 of each year that such share is outstanding ("Series C
Dividends"). Any shares of Series C Preferred Stock surrendered
for conversion (other than a conversion effected after a notice of
redemption is given by the Company but before such redemption is
effected) into Common Stock or Series A Common Stock
(collectively, the "Common Equity") as described below cease to
have any rights with respect to any accrued Series C Dividends
which have not been declared and paid on or before the date as of
which the conversion becomes effective.
So long as any shares of Series C Preferred Stock are
outstanding, no dividends may be declared or paid or set apart for
payment on, and no other distribution of cash or property or other
rights of the Company or any redemption may be declared, offered
or made in respect of any shares of Common Equity or preferred
stock of any series which expressly ranks on a parity with or
junior to the Series C Preferred Stock for any period. Series C
Dividends may, however, be declared and paid if such dividends are
payable in Common Equity or shares of any series of preferred
stock which expressly rank junior to the Series C Preferred Stock.
Liquidation Preference. In the event of the liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary ("Liquidation"), each holder of Series C Preferred
Stock shall be entitled to receive with respect to each share he
or she holds, after the satisfaction of all distributions to
holders of other series of preferred stock, if any, which are
required to be redeemed prior to or in connection with the
consummation of such Liquidation or which expressly rank prior in
liquidation preference to the Series C Preferred Stock including
any series of preferred stock which is mandatorily redeemable
prior to such payment on the Series C Preferred Stock
(collectively, the "Senior Payments"), but before any distribution
is made to or set aside for the holders of Common Equity or any
other series of preferred stock, if any, which are not then
required to be redeemed or which are expressly junior in
liquidation preference to the Series C Preferred Stock, cash or
any other asset of the Company in an amount (or having a fair
market value) equal to $1,000.00 per share (the "Liquidation
Preference") plus an amount equal to all Series C Dividends
accrued and unpaid thereon to the date of final distribution in
Liquidation, prorated based on a 180-day semi-annual period.
If, after the satisfaction of all Senior Payments, the assets
of the Company available for distribution to the holders of the
Series C Preferred Stock shall be insufficient to permit the
payment in full of the amount due to the holders of the Series C
Preferred Stock then all the assets of the Company shall be
distributed pari passu among the holders of the Series C Preferred
Stock and the holders of other series of preferred stock which are
not junior in liquidation preferences to the Series C Preferred
Stock, if any, in accordance with their respective liquidation
preferences. The fair market value of any assets of the Company
and the proportion of cash and other assets distributed by the
Company to the holders of the Series C Preferred Stock shall be
reasonably determined in good faith by the Board of Directors of
the Company.
Voting Rights. The holders of the Series C Preferred Stock
have no voting rights except as described below or as otherwise
provided by law. The holders are entitled to vote with the
holders of Common Stock generally with each share entitled to as
many votes as the number of shares of Common Stock into which it
may be converted. The number of shares of Common Stock into which
the Series C Preferred Stock may be converted depends upon the
Conversion Price (as described below) then in effect.
Without the consent or affirmative vote of the holders of a
majority of the outstanding shares of Series C Preferred Stock,
voting separately as a class, the Company may not authorize,
create or issue, or increase the authorized amount of, any class
or series of stock ranking on a parity with or prior to the Series
C Preferred Stock (other than the Outstanding Preferred Stock and
the Series R Preferred Stock) as to dividends or upon liquidation,
or increase the number of shares of Series C Preferred Stock.
The affirmative vote or consent of the holders of a majority
of the outstanding shares of the Series C Preferred Stock, voting
separately as a class, will be required for any amendment,
alteration or repeal, whether by merger or consolidation or
otherwise, of the Company's Certificate of Amendment to Restated
Certificate of Incorporation, Bylaws or the Series C Preferred
Stock Certificate of Designations, or any certificate supplemental
thereto if the amendment, alteration or repeal adversely affects
the preferences, powers or rights of the holders of the Series C
Preferred Stock.
The affirmative vote or consent of the holders of a majority
of the outstanding shares of the Series C Preferred Stock, voting
separately as a class, is also required prior to any merger,
consolidation or sale of all or substantially all of the assets of
the Company for securities of another corporation (a "Merger"),
unless the authorized capital stock of the surviving corporation
immediately after such Merger includes only classes or series of
stock for which no such consent or vote would have been required
if such classes or series had been authorized by the Company
immediately prior to such Merger or which have the same rights and
preferences as a class or series of stock of the Company
authorized and designated prior to such Merger and continuing as
an authorized and designated class or series at the time thereof.
Conversion Rights. Each share of Series C Preferred Stock is
convertible, at the option of the holder thereof and at any time,
into 65.68 shares of Common Equity (a conversion price of
$15.225). The Conversion Price is subject to adjustment upon the
occurrence of certain events described in the Proposed Series C
Preferred Stock Certificate of Designations. In case the shares
are called for redemption, the right to convert the shares
terminates at the close of business on the date of redemption;
provided that no default by the Company in the payment of the
applicable redemption price shall have occurred and be continuing.
Redemption. The Company may not redeem the Series C Preferred
Stock unless (i) for a period of at least ten consecutive trading
days the market price (which is the average closing price for the
immediately preceding twenty days) has been not less than 140% of
the Conversion Price or (ii) there is a Merger which provides for
the payment of consideration to the holders of the Series C
Preferred Stock equal to or greater than 140% of the Liquidation
Preference of the Series C Preferred Stock.
The redemption price per share of Series C Preferred Stock
will be equal to the Liquidation Preference thereof, plus all
accrued and unpaid Series C Dividends thereon. Any share that is
the subject of a redemption by the Company ceases to be
outstanding (and the rights of the holder of Series C Preferred
Stock thereof are limited to payment of the redemption price, plus
accumulated and unpaid Series C Dividends) on the date which is
twenty business days after the Company shall have (a) deposited in
the mail written notice of the redemption to each holder of Series
C Preferred Stock and (b) set aside an amount equal to the
redemption price payable on all shares subject to redemption.
Amounts payable on redemption that are not paid when due shall
bear interest at a rate equal to 2% per annum above the prime rate
that is then in effect or as announced by Chemical Bank, New York,
New York.
Registration Rights. Pioneer has been provided with
registration rights for the shares of Common Stock underlying the
Series C Preferred Stock. The registration rights may be
exercised only twice and only by the holder of a majority of the
shares of Series C Preferred Stock. The Company has agreed to pay
all expenses (other than underwriting discounts) in connection
with such registration.
Outstanding Preferred Stock
The following is a summary of the rights and preferences of
the Outstanding Preferred Stock as contained in the Series B
Preferred Stock Certificate of Designations and the following
description is qualified in its entirety by reference thereto. A
copy of the Series B Preferred Stock Certificate of Designations
may be obtained upon written request to the Company, 15400 Sherman
Way, Suite 500, Van Nuys, California 91406, attention: Ronald B.
Cushey.
Series B Dividends
The holders of record of the Outstanding Preferred Stock are
entitled to receive, when as and if declared by the Board of
Directors of the Company, either (a) out of any funds legally
available therefor, cumulative cash dividends per share (the "Cash
Series B Dividends") equal to the "Cash Rate" (as hereinafter
defined) multiplied by the Series B Liquidation Preference (as
hereinafter defined) for each three-month period ("Quarterly
Payment Period") ending on March 31, June 30, September 30 and
December 31 of each year that such Share is outstanding; or (b) to
the extent legally available therefor, cumulative dividends per
share (the "PIK Series B Dividends") in additional shares of
Outstanding Preferred Stock equal to the "PIK Rate" (as
hereinafter defined) multiplied by the Series B Liquidation
Preference, at the Company's election. Payment Dates are April 1,
July 1, October 1 and January 1. Cash Series B Dividends and PIK
Series B Dividends are collectively referred to herein as
"Series B Dividends." Series B Dividends for the first Quarterly
Payment Period accrued commencing as of September 1, 1992.
Series B Dividends are prorated on the basis of a 90 day quarter
and the actual number of days elapsed, if appropriate.
Until the date no Outstanding Preferred Stock is outstanding
(the "Termination Date"), the Company may not declare, pay or set
aside for payment any dividends (other than in shares of Common
Stock or shares of any series of preferred stock which rank junior
to or on a parity with the Outstanding Preferred Stock ("Junior
Stock")) or other distribution in respect of Junior Stock, nor may
any redemption be declared, offered or made in respect of any
shares of Junior Stock for any period provided, however, that the
Company may pay cash dividends on Junior Stock if: (a) the Junior
Stock is either the Series C Preferred Stock or the Junior Stock
is issued in connection with or after a Designated Merger (as such
term is defined in the Exchange Indenture); and (b) the aggregate
amount of all such cash dividends together with all Cash Series B
Dividends on account of the Outstanding Preferred Stock declared
or paid after the date of initial issuance of such stock does not
exceed the aggregate cumulative consolidated net income of the
Company from the date of initial issuance of the Outstanding
Preferred Stock, after adding back in the Net Worth Exclusions (as
defined in the Exchange Indenture); and (c) the Company has paid
Cash Series B Dividends on the Outstanding Preferred Stock for the
immediately preceding or concurrent Payment Date and the Payment
Date (if any) immediately prior thereto.
The Cash Rate is a quarterly rate of 1 1/4% until May 1, 1996,
and a quarterly rate of 2 1/2% thereafter. The PIK Rate is a
quarterly rate of 2% until May 1, 1996 and a quarterly rate of 3%
thereafter. Should Series B Dividends not be paid on any Payment
Date, such unpaid Series B Dividends shall be added to the
Series B Liquidation Preference at the PIK Rate effective (i) at
the beginning of the next Quarterly Payment Period after the
Quarterly Payment Period for which such Series B Dividends were
not paid or (ii) in the case of a redemption of Outstanding
Preferred Stock, on the date next preceding redemption, and shall
thereafter accrue additional Series B Dividends as determined in
accordance with the foregoing. Any Series B Dividend payment made
shall first be credited against the earliest accrued but unpaid
Series B Dividend due.
Liquidation Preference. In the event of the Liquidation of
the Company, each holder of Outstanding Preferred Stock is
entitled to receive with respect to each share he or she holds,
after the satisfaction of all distributions to holders of other
series of preferred stock, if any, which expressly rank prior to
the Outstanding Preferred Stock (collectively, the "Series B
Senior Payments"), but before any distribution is made to or set
aside for the holders of Common Stock or any other series of
preferred stock, if any, which are not then required to be
redeemed or whose terms specifically provide that such classes or
series rank junior to the Outstanding Preferred Stock or fail to
specify their ranking relative to the Outstanding Preferred Stock
with respect to payments of dividends and distributions on
Liquidation, cash or any other asset of the Company in an amount
(or having a fair market value) equal to $10.00 per share of
Outstanding Preferred Stock (the "Series B Liquidation
Preference") plus an amount equal to all Series B Dividends
accrued and unpaid with respect to such share to the date of final
distribution in Liquidation, prorated based on a 90-day quarter
and the actual number of days elapsed.
If, after the satisfaction of all Series B Senior Payments,
the assets of the Company available for distribution to the
holders of Outstanding Preferred Stock are insufficient to permit
the payment in full of the amount due to the holders of
Outstanding Preferred Stock then all the assets of the Company
shall be distributed pari passu among the holders of Outstanding
Preferred Stock and the holders of other series of preferred stock
of the Company whose terms specifically provide that such series
shall rank on a parity with the Outstanding Preferred Stock, if
any, in accordance with their respective liquidation preferences.
The fair market value of any assets of the Company and the
proportion of cash and other assets distributed by the Company to
the holders of Outstanding Preferred Stock shall be reasonably
determined in good faith by the Board of Directors of the Company.
A merger or consolidation of the Company with another
corporation or a voluntary sale of all or substantially all the
assets of the Company principally in exchange for stock and/or
securities of another corporation in which the Company does not
survive (any of the foregoing being herein referred to as a
"Series B Merger") shall not be deemed a Liquidation, but only if
any such event occurs other than as part of a proceeding under
Title 11 of the United States Code or any federal or state law for
the protection of creditors or relief of debtors.
Voting Rights. Holders of Outstanding Preferred Stock
have no voting rights except as described below or as otherwise
provided by law. Until the Termination Date, holders of
Outstanding Preferred Stock voting separately and as a series will
be entitled annually to elect two members of the Board of
Directors, who shall be in addition to the regular members of the
Board of Directors elected by holders of the Common Stock and
other classes of preferred stock, the number of regular members of
which shall not exceed 10 members. Any members so elected shall
serve until their successors are duly elected and qualified or
until the Termination Date, whichever first occurs, at which time
the term of such members shall end.
If, as of any Payment Date, at least two quarterly Series B
Dividends (whether or not declared) shall not have been paid in
full in cash or if the Company has elected to pay PIK Series B
Dividends for two quarterly Series B Dividends, or on May 1, 1996,
the members of the Board of Directors elected pursuant to the
immediately preceding paragraph shall have the right to elect two
additional members of the Board of Directors to serve until the
next annual meeting of stockholders. At each subsequent annual
meeting of stockholders until the Termination Date, the holders of
Outstanding Preferred Stock shall have the right, voting
separately and as a series, thereafter to elect two members of the
Board of Directors for terms ending (i) at the next succeeding
annual meeting of stockholders when their successors are duly
elected and qualified, or (ii) the Termination Date, whichever
shall first occur. These two additional members shall be in
addition to the regular members of the Board of Directors elected
by the holders of the Common Stock and other preferred stock and
the members elected by the holders of Outstanding Preferred Stock
pursuant to the immediately preceding paragraph. Any members so
elected or appointed will serve until their successors are elected
and qualified, or until the Termination Date, or until such time
as the holders are not entitled to these special voting rights, at
which time the term of such members shall end.
If as of any Payment Date there remains insufficient
authorized but unissued shares of Outstanding Preferred Stock to
pay the next Series B Dividend as a PIK Series B Dividend, then a
majority of the members of the Board of Directors serving pursuant
to the two immediately preceding paragraphs may elect additional
directors such that, when added to the number of directors to
which the holders of the Outstanding Preferred Stock are entitled
pursuant to the two immediately preceding paragraphs, all such
directors constitute a majority of the Board of Directors. Such
additional members shall serve until the next annual meeting of
stockholders. At the next stockholders' meeting and annually
thereafter until the Termination Date, the holders of the
Outstanding Preferred Stock voting separately and as a series may
elect such additional directors for terms ending (i) at the next
succeeding annual meeting of stockholders when their successors
are duly elected and qualified, or (ii) the Termination Date,
whichever first occurs. Any members so elected shall serve until
their successors are elected and qualified or until the
Termination Date, at which time the term of such members shall
end. At such times as there are sufficient authorized but
unissued shares of Outstanding Preferred Stock so that the next
quarterly dividend may be a PIK Series B Dividend, the term of the
directors elected pursuant to this provision shall end and the
authorized number of Directors shall be accordingly reduced.
For as long as any of the above special voting rights remain
vested, the number of members of the Board of Directors shall be
increased by the number of additional directors who may be elected
in accordance with such special voting rights. In exercising
voting rights, each holder of Outstanding Preferred Stock shall
have one vote for each share held of record.
At all times until the Termination Date, the Board of
Directors shall form special committees for the purposes of (i)
pricing of advances to Carolco (or its successors if such
successors hold at least 25% of the issued and outstanding capital
stock of the Company generally entitled to vote for directors)
under the video distribution agreement between LFM and Carolco and
(ii) approving any Series B Merger of the Company which would
otherwise require a vote of the holders of the Outstanding
Preferred Stock (as described below). At least 50% of the members
of any such special committee will be directors chosen by the
Board of Directors from among the directors selected by the
holders of Outstanding Preferred Stock pursuant to the paragraphs
above. Action of each special committee will require an
affirmative vote of the majority of all members of such special
committee. If the special committee is unable to resolve or act
upon a matter under clause (i), all the members of the Company's
Board of Directors who are not affiliated with Carolco or the
Strategic Investors will constitute another special committee to
act on such matters by a majority vote. If the special committee
is unable to resolve or act upon a matter under clause (ii), the
members of the Board who are not affiliated with the party with
whom the Series B Merger is to be consummated shall constitute a
special committee to act on such matters by majority vote. (A
member of the Board will not be deemed affiliated with a person
merely because such person has voted for the member's election to
the Board.) A Series B Merger not approved pursuant to clause
(ii) or by a special committee composed of Directors not
affiliated with the party with whom the Series B Merger is to be
consummated (as provided above) may also be approved by a majority
vote of the holders of Common Stock and all other classes or
series of stock generally entitled to vote on matters with Common
Stock, and by the holders of the Outstanding Preferred Stock,
voting together, one vote per share without regard to class or
series, which Common Stock, other classes or series of stock and
Outstanding Preferred Stock is not held by the party with whom the
Series B Merger is to be consummated or any affiliate of such
party (which for purposes of any Series B Merger with Carolco or
a Strategic Investor or any affiliate thereof shall be deemed to
include Carolco and all Strategic Investors and their respective
affiliates).
The Company, Carolco and the Strategic Investors (Pioneer, Le
Studio Canal + and RCS Video Services International B.V.) and
their affiliates (as defined in Rule 13e-3(a)(1) of the Exchange
Act) may not vote any shares of Outstanding Preferred Stock they
acquire, and such shares will be considered as if redeemed in
determining a quorum or majority of the Outstanding Preferred
Stock.
The consent or affirmative vote of the holders of a majority
(or a greater number, if required by law) of the outstanding
shares of Outstanding Preferred Stock, voting separately as a
class, will be required for:
(a) The amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any provision of or
the addition of any provision to the Company's Restated
Certificate of Incorporation or of any amendment or
supplement thereto (including any certificate of designation
or any similar document relating to any series of preferred
stock) or the Certificate of Designations relating to the
Outstanding Preferred Stock, which would alter or change the
preferences, powers or rights of Outstanding Preferred Stock
to affect the holders of Outstanding Preferred Stock
adversely. Matters permitted (with or without a vote) under
paragraphs (b) or (c) below shall not be deemed to affect the
holders of Outstanding Preferred Stock adversely; nor shall
a vote of the holders of Outstanding Preferred Stock be
required for the amendment of the Restated Certificate of
Incorporation or the passing of a resolution so as to
authorize, create, designate or issue, or to increase the
authorized or outstanding amount of, any shares of any class
or series ranking junior to the Outstanding Preferred Stock
(and, if convertible or exchangeable, convertible or
exchangeable only into shares junior to the Outstanding
Preferred Stock).
(b) The authorization, creation, designation or
issuance (or the increase in the authorized amount) of any
shares of any class or series, or any security convertible
into or having option rights to purchase shares of any class
or series which would rank on a parity with or prior to the
Outstanding Preferred Stock unless (a) the consideration
received or to be received by the Company upon the issuance
of such shares or upon exercise, as appropriate (as
reasonably determined in good faith by the Board of
Directors, whose determination shall be conclusive), is at
least the amount that holders of such shares would be
entitled to receive in the event of a Liquidation (excluding
then accrued Series B Dividends), (b) such shares are issued
in arm's length transactions (as reasonably determined in
good faith by the Board of Directors), (c) such shares may
not be additional Outstanding Preferred Stock and (d) the
liquidation preference of such shares may not exceed $15
million.
(c) A Series B Merger, unless (i) the surviving or
successor corporation is a corporation: (x) whose common
stock is eligible to be listed for public trading to the same
extent as the Common Stock of the Company before the Series B
Merger; (y) which has a common stock market capitalization
(number of shares of outstanding common stock after the
Series B Merger on a pro forma basis times the "Series B
Market Price" (as defined below) of a share) immediately
before the Series B Merger at least as great as the Common
Stock market capitalization of the Company on the date of
initial issuance of Outstanding Preferred Stock; and (z)
which has pro forma stockholders' equity (as determined by
the Company's independent accountants in accordance with
GAAP) after the Series B Merger less the Series B Liquidation
Preference of the Outstanding Preferred Stock or the
successor to such shares, and less the liquidation preference
or mandatory redemption price of all securities ranking prior
to the Outstanding Preferred Stock at least as great as the
stockholders' equity of the Company (as determined by the
Company's independent accountants in accordance with GAAP)
before and without regard to the Series B Merger less the
Series B Liquidation Preference of the Outstanding Preferred
Stock and less the liquidation preference or mandatory
redemption price of all securities ranking prior to the
Outstanding Preferred Stock, prior to the Series B Merger;
and (ii) if the Company does not survive the Series B Merger,
the shares of the surviving corporation into which the
Outstanding Preferred Stock is converted have rights,
preferences and privileges no worse than those of the
Outstanding Preferred Stock and such shares are eligible to
be listed for trading to the same extent as the Outstanding
Preferred Stock immediately before the Series B Merger and
the survivor shall apply to list such shares; and (iii) the
authorized capital stock of the surviving corporation
immediately after such Series B Merger includes only classes
or series of stock (A) for which no such consent or vote
would have been required if such classes or series had been
authorized or issued by the Company immediately prior to such
Series B Merger or (B) which have the same rights and
preferences as a class or series of stock of the Company
authorized and designated prior to the initial issuance of
the Outstanding Preferred Stock or with the consent or vote
of the Outstanding Preferred Stock prior to such Series B
Merger.
Conversion Rights. After the earlier of (i) May 1, 1996 and
(ii) the first Payment Date (as defined in the Certificate of
Designations relating to the Outstanding Preferred Stock) on which
the Company has elected to pay PIK Series B Dividends for the
fourth Quarterly Payment Period, has failed to pay Series B
Dividends for four Quarterly Payment Periods, or any combination
of four such elections or failures, in aggregate, has occurred,
each share of Outstanding Preferred Stock will be convertible, at
the option of the holder thereof and at any time, into that number
of shares of Common Stock obtained by dividing the Series B
Liquidation Preference (as adjusted from time to time) of such
share by the "Conversion Price" (as defined below).
The conversion price per share of Common Stock for purposes
of conversion of the Outstanding Preferred Stock (the "Conversion
Price") shall be either:
(a) The Series B Market Price (as hereinafter defined) if
Outstanding Preferred Stock may be converted pursuant to clause
(ii) above, or
(b) If the Outstanding Preferred Stock may be converted
pursuant to clause (i) above, shall be set for each three
month period (or portion thereof) commencing on the date that
is the 36th month anniversary after initial issuance of the
Outstanding Preferred Stock, through August 31, 1998, to
either (i) the Series B Market Price, or (ii) if applicable,
the Floor Price (as hereinafter defined).
The Floor Price equals $20 per share of Common Stock during
the first three months following May 1, 1996 and is reduced by
$1.25 per share of Common Stock at the end of each three month
period thereafter. If the Company has paid all accrued Series B
Dividends in cash, then the Conversion Price shall be the greater
of the Series B Market Price for such quarter or the Floor Price
for such quarter. If the Company has not paid a Cash Series B
Dividend for each Quarterly Payment Period through the end of 36
months after initial issuance of the Outstanding Preferred Stock,
or fails to pay Cash Series B Dividends for any Quarterly Payment
Period thereafter, then the Conversion Price will be equal to the
Series B Market Price at the end of such 36-month period, or on
the first day of the next Quarterly Payment Period after which
such failure occurred, as applicable. Once the Conversion Price
has been set to Series B Market Price, the Conversion Price will
not again be reset until September 1, 1998.
On September 1, 1998, the Conversion Price will be reset to
the lower of (i) Series B Market Price or (ii) $5.00 per share.
The Company may (but shall have no obligation to) from time to
time temporarily or permanently reduce the Conversion Price as it
deems appropriate.
In case the shares of Outstanding Preferred Stock are called
for redemption, the right to convert such shares shall terminate
at the close of business on the redemption date, provided that no
default by the Company in the payment of the applicable Redemption
Price (as defined below) shall have occurred and be continuing.
The term "Series B Market Price" per share of Common Stock on
any day shall mean the average of the closing prices on the NYSE
if the Common Stock is listed thereon, or, if not so listed, on
the principal national stock exchange on which the Common Stock is
then listed, or, if not so listed, on the Nasdaq, in each case,
for the 20 consecutive trading days immediately preceding the date
of determination, provided that if at the time of any computation
of Series B Market Price the Common Stock is not then traded on
any trading market, the Series B Market Price shall be the fair
value as reasonably determined in good faith by the Board of
Directors of the Company.
Redemption. The Company generally may, at its option, redeem
at the Series B Liquidation Preference per share (as adjusted) on
the redemption date ("Redemption Price"), from funds legally
available therefor, all or any number of the outstanding shares of
Outstanding Preferred Stock. If the Conversion Price is at any
time set to Series B Market Price or, at September 1, 1998, is set
to $5.00 per share if $5.00 per share is lower than Series B
Market Price, then the Company may, within 10 business days of
receipt of the notice from the holders of Outstanding Preferred
Stock requesting conversion, notify converting holders that it
will redeem all or a portion of the shares specified in such
notice as being tendered for conversion at the Series B
Liquidation Preference per share on the Redemption Date provided
that the redemption shall be completed within 20 days of the
Company's redemption notice. During such initial 10 business day
period and, if redemption is elected by the Company, during such
20-day period, the shares shall not be converted.
The Outstanding Preferred Stock may be redeemed in whole or
in part only in amounts of 500,000 shares or integral multiples of
100,000 shares in excess of 500,000 shares; provided, however,
that if less than 1,000,000 shares are outstanding, then the
Outstanding Preferred Stock shall be redeemable only in whole.
Any share that is the subject of a redemption by the Company
ceases to be outstanding (and the rights of the holder thereof are
limited to payment of the Redemption Price, plus accumulated and
unpaid Series B Dividends) on the date which is 20 business days
after the Company shall have (a) deposited in the mail written
notice of the redemption to each holder of Outstanding Preferred
Stock and (b) set aside an amount equal to the redemption price
payable on all shares subject to redemption. Amounts payable on
redemption that are not paid when due shall bear interest at the
prime rate that is then in effect or as announced by Chemical
Bank, New York, New York. The Redemption Price shall be adjusted,
at the discretion of the Board of Directors of the Company, to
take into account any stock split or similar change in the
Outstanding Preferred Stock.
For all purposes except the date from which Series B Dividends
shall accrue, the initial issuance of the Outstanding Preferred
Stock shall be deemed to have occurred on the first day of the
month following the month in which such shares are first actually
issued.
For a complete description of the terms and conditions of the
Outstanding Preferred Stock, reference should be made to the
Certificate of Designations for the Outstanding Preferred Stock.
LEGAL OPINIONS
The legality of the Common Stock and the Amended Outstanding
Preferred Stock issuable in the Exchange Offer is being passed
upon for the Company by Sidley & Austin, Los Angeles, California.
EXPERTS
The consolidated financial statements and schedules of LIVE
Entertainment Inc. at December 31, 1994 and 1995, and for each of
the three years in the period ended December 31, 1995, appearing
in this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their reports
thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and
auditing.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1994
and 1995 . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995 . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1993, 1994 and 1995 . . . . F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995 . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . F-8
Condensed Consolidated Balance Sheets as of June 30,
1996 and December 31, 1995 (unaudited) . . . . . . . F-28
Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1996 and
1995 (unaudited) . . . . . . . . . . . . . . . . . . F-29
Condensed Consolidated Statements of Cash Flows
for the Three and Six Months Ended
June 30, 1996 and 1995 (unaudited) . . . . . . . . . F-30
Notes to Condensed Consolidated
Financial Statements (unaudited) . . . . . . . . . . F-31
REPORT OF INDEPENDENT AUDITORS
Board of Directors
LIVE Entertainment Inc.
We have audited the accompanying consolidated balance sheets
of LIVE Entertainment Inc. and subsidiaries as of December 31, 1994
and 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. Our audits also included the
financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above,
present fairly, in all material respects, the consolidated
financial position of LIVE Entertainment Inc. and subsidiaries at
December 31, 1994 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
ERNST & YOUNG LLP
Century City
Los Angeles, California
March 11, 1996
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31,
1994 1995
ASSETS
ASSETS:
Cash and cash equivalents, including restricted cash
of $4,663 and $1,352 . . . . . . . . . . . . . . . . . $ 24,264 $ 49,487
Accounts receivable, less allowances of $19,469
in 1994. . . . . . . . . . . . . . . . . . . . . . . . 1,950 --
Inventories . . . . . . . . . . . . . . . . . . . . . . 7,842 4,813
Receivable related to assets held for sale. . . . . . . 17,916 --
Property and equipment, net. . . . . . . . . . . . . . . . 1,400 1,145
Film rights, net of accumulated amortization of $466,260
and $519,604 . . . . . . . . . . . . . . . . . . . . . . 71,108 66,700
Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,443 1,353
Goodwill, net of accumulated amortization of $36,118
and $40,042 . . . . . . . . . . . . . . . . . . . . . . . 29,871 25,947
$156,794 $149,445
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . . 7,305 6,675
Accrual for returns and advertising net of accounts
receivable of $15,447 in 1995 . . . . . . . . . . . . . -- 3,430
Accrued expenses. . . . . . . . . . . . . . . . . . . . 11,483 12,451
Notes payable . . . . . . . . . . . . . . . . . . . . . 3,333 8,333
Increasing Rate Senior Subordinated Notes due 1999,
including capitalized interest of $16,871 and $13,184. 56,871 53,184
Film rights obligations . . . . . . . . . . . . . . . . 19,776 18,559
Liabilities related to assets held for sale . . . . . . 13,542 --
Dividends payable . . . . . . . . . . . . . . . . . . . 2,131 2,309
Income taxes payable and deferred income taxes. . . . . 6,636 6,484
Total liabilities . . . . . . . . . . . . . . . . . . 121,077 111,425
STOCKHOLDERS' EQUITY:
Series B Cumulative Convertible Preferred Stock--
authorized 9,000,000 shares; $1.00 par value;
$56,000,000 liquidation preference (1994); $41,970,000
liquidation preference (1995); 5,600,000 (1994)
and 4,197,000 (1995) shares outstanding. . . . . . . . 5,600 4,197
Series C Convertible Preferred Stock--15,000 shares
authorized and outstanding; $1.00 par value;
$15,000,000 liquidation preference . . . . . . . . . . 15 15
Common Stock -- authorized 24,000,000 shares (1994 and
1995); $0.01 par value; 2,418,720 (1994) and
2,418,424 (1995) shares outstanding . . . . . . . . . 24 24
Additional paid-in capital. . . . . . . . . . . . . . . 136,753 129,668
Retained deficit. . . . . . . . . . . . . . . . . . . . (106,675) (95,884)
35,717 38,020
$156,794 $149,445
See notes to consolidated financial statements.
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
Year Ended
December 31,
1993 1994 1995
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . $ 143,735 $ 117,205 $ 140,112
Cost of goods sold . . . . . . . . . . . . . . . 124,336 101,781 113,025
GROSS PROFIT. . . . . . . . . . . . . . . . 19,399 15,424 27,087
Operating expenses:
Selling, general and administrative expenses. 17,248 17,673 15,249
Amortization of goodwill. . . . . . . . . . . 3,924 3,925 3,925
21,172 21,598 19,174
(1,773) (6,174) 7,913
Disposal of VCL/Carolco Communications GmbH (VCL):
Net Sales . . . . . . . . . . . . . . . . . . 28,511 22,712 32,257
Costs and Expenses. . . . . . . . . . . . . . 32,174 22,712 32,257
(3,663) -- --
(Loss) Gain on disposal of VCL. . . . . . . . (15,741) -- 2,913
(19,404) -- 2,913
OPERATING (LOSS) PROFIT . . . . . . . . . . (21,177) (6,174) 10,826
Interest and other income . . . . . . . . . . 1,434 2,692 2,424
Interest expense. . . . . . . . . . . . . . . (7,698) (5,992) (1,859)
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES. . . . . . . . . . . . (27,441) (9,474) 11,391
Income tax expense. . . . . . . . . . . . . . 768 200 600
(LOSS) INCOME FROM CONTINUING OPERATIONS. . (28,209) (9,674) 10,791
Discontinued Operations:
Income (loss) from discontinued operations
net of income taxes. . . . . . . . . . . . . 1,690 (100) --
Loss on disposal and operating losses during
phase-out period, net of income tax benefit. (23,773) -- --
(LOSS) FROM DISCONTINUED OPERATIONS . . . . (22,083) (100) --
NET (LOSS) INCOME . . . . . . . . . . . . . $ (50,292) $ (9,774) $ 10,791
Net (loss) income per common share:
Primary:
Continuing operations . . . . . . . . . . . . $ (13.15) $ (8.05) $ 1.34
Discontinued operations . . . . . . . . . . . (9.15) (0.04) --
Net (loss) income . . . . . . . . . . . . . . (22.30) (8.09) 1.34
Weighted average number of shares outstanding. . 2,417,801 2,418,003 2,436,309
Net (loss) income attributable to common stock . $ (53,881) $ (19,565) $ 3,255
Fully Diluted:
Continuing operations . . . . . . . . . . . . $ (13.15) $ (8.05) $ .53
Discontinued operations . . . . . . . . . . . (9.15) (0.04) --
Net (loss) income . . . . . . . . . . . . . . (22.30) (8.09) .53
Weighted average number of shares outstanding. . 2,417,801 2,418,003 20,541,896
Net (loss) income attributable to common stock . $ (53,881) $ (19,565) $ 10,791
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31,
1993 1994 1995
Shares Amounts Shares Amounts Shares Amounts
<S> <C> <C> <C> <C> <C> <C>
Series B Cumulative Convertible
Preferred Stock
Beginning balance . . . . . . . . 6,000,000 $ 6,000 1,000,000 $ 1,000 5,600,000 $ 5,600
Series B Cumulative Convertible
Preferred Stock issued
Repurchase of Series B Cumulative
Convertible Preferred Stock . . (400,000) (400) (1,400,000) (1,403)
Other . . . . . . . . . . . . . . (3,000)
Transferred (to) from current
liabilities . . . . . . . . . . (5,000,000) (5,000) 5,000,000 5,000
Ending balance. . . . . . . . . . 1,000,000 1,000 5,600,000 5,600 4,197,000 4,197
Series C Convertible Preferred
Stock
Beginning balance . . . . . . . . 15,000 15 15,000 15
Series C Convertible Preferred
Stock issued. . . . . . . . . . 15,000 15
Ending balance. . . . . . . . . . 15,000 15 15,000 15 15,000 15
Common Stock
Beginning balance . . . . . . . . 2,417,306 24 2,418,003 24 2,418,720 24
Common Stock issued (repurchased) 697 717 (296)
Ending balance. . . . . . . . . . 2,418,003 24 2,418,720 24 2,418,424 24
</TABLE>
(Continued)
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued)
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Additional Paid-in Capital
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,405 $ 106,604 $ 136,753
Series B Cumulative Convertible Preferred Stock dividend accrual. . . (3,000) (2,198)
Series C Convertible Preferred Stock dividend accrual . . . . . . . . (791) (829)
Adjustment related to five for one reverse stock split. . . . . . . . 97
Common Stock issued (Repurchased) . . . . . . . . . . . . . . . . . . 7 (1)
Series B Cumulative Convertible Preferred Stock repurchase. . . . . . (1,060) (4,057)
Issuance of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . 600
Series C Convertible Preferred
Stock issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,495
Series B Cumulative Convertible
Preferred Stock transferred (to) from
current liabilities . . . . . . . . . . . . . . . . . . . . . . . . (35,000) 35,000 --
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,604 136,753 129,668
Retained Earnings (Deficit)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . (46,609) (96,901) (106,675)
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . (50,292) (9,774) 10,791
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,901) (106,675) (95,884)
Other
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . (447) -- --
Translation adjustment. . . . . . . . . . . . . . . . . . . . . . . . 447 -- --
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . $ 10,742 $ 35,717 $ 38,020
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
Year Ended
December 31,
1993 1994 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
(Loss) income from continuing operations. . . . . . . . . . . . . . . . $ (28,209) $ (9,674) $ 10,791
Adjustments to reconcile net (loss) income to net cash provided by
(used for) continuing operating activities:
Depreciation and amortization of property and equipment. . . . . . . . 880 745 715
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . 3,924 3,925 3,925
Loss on disposal of VCL. . . . . . . . . . . . . . . . . . . . . . . . 15,741 -- --
Amortization of and adjustments to film rights . . . . . . . . . . . . 53,091 49,056 60,330
Income taxes payable and deferred income taxes . . . . . . . . . . . . (478) 624 (152)
(Increase) decrease in operating assets, net of acquisitions:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 6,515 482 1,950
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,802 2,282 3,029
Receivable related to assets held for sale . . . . . . . . . . . . . . (12,637) 68,084 17,916
Receivable from stockholder. . . . . . . . . . . . . . . . . . . . . . (2,683) 8,047 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427 420 1,090
Increase (decrease) in operating liabilities, net of acquisitions:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . (13,888) (1,707) 4,338
Accrual for returns and advertising. . . . . . . . . . . . . . . . . . -- -- 3,430
Liabilities related to assets held for sale. . . . . . . . . . . . . . 6,436 (33,059) (13,542)
Acquisition of film rights . . . . . . . . . . . . . . . . . . . . . . (31,907) (58,096) (59,921)
Film rights obligations incurred . . . . . . . . . . . . . . . . . . . 31,907 58,096 59,921
Payments on film rights obligations. . . . . . . . . . . . . . . . . . (43,631) (54,170) (61,138)
Cash provided by (used for) continuing operating activities. . . . . (8,710) 35,055 32,682
Cash (used for) provided by discontinued operations. . . . . . . . . 1,150 (100) --
Cash provided by (used for) operating activities . . . . . . . . . . (7,560) 34,955 32,682
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . . . . . . . . . . (3,676) (459) (460)
Cash used for investing activities . . . . . . . . . . . . . . . . . (3,676) (459) (460)
FINANCING ACTIVITIES:
Issuance of long-term obligations . . . . . . . . . . . . . . . . . . . 211,260 2,500 10,000
Payments on long-term obligations . . . . . . . . . . . . . . . . . . . (189,381) (50,631) (8,689)
Repurchase of Series B Cumulative Preferred Stock . . . . . . . . . . . -- (1,460) (5,460)
Dividends paid on Preferred Stock (Series B and Series C) . . . . . . . (2,249) (2,999) (2,850)
Issuance of Series C Preferred Stock. . . . . . . . . . . . . . . . . . 15,117 -- --
Cash provided by (used for) financing activities . . . . . . . . . . 34,747 (52,590) (6,999)
Increase (decrease) in cash and cash equivalents . . . . . . . . . . 23,511 (18,094) 25,223
Cash and cash equivalents at beginning of period . . . . . . . . . . 18,847 42,358 24,264
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 42,358 $ 24,264 $ 49,487
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Note 1 - Summary of Significant Accounting Policies
Background and Operations: LIVE Entertainment Inc. ("LIVE" or
the "Company") was formed in 1988 and its largest ongoing
businesses are LIVE Film & Mediaworks ("LFM") (formerly LIVE Home
Video Inc.) and LIVE International ("LI"), which primarily acquire,
rights to produce, and distribute theatrical motion pictures,
children's films and special interest programs (including CD-ROM)
which they market and distribute in all media to wholesalers,
retailers and consumers in the United States and Canada (LFM) and
internationally (LI). As part of its international activities, the
Company also owned an 81% interest in VCL/Carolco Communications
GmbH ("VCL"), a home video distribution and marketing company
headquartered in Munich, Germany. VCL's year-end is November 30.
In February 1995, LIVE executed a preliminary agreement providing
for the disposal of its interest in VCL. In November 1995, LIVE
completed this sales transaction. The Company's continuing
operations are principally in a single business segment, the
production, distribution and retail sale of a broad variety of film
related entertainment software products.
Principles of Consolidation: The financial statements include
the accounts of the Company and its subsidiaries LFM, LI and VCL.
The financial statements reflect the Company's interests in VCL as
"Assets Held For Sale" and "Liabilities Related To Assets Held For
Sale" (1994) and account for VCL as a disposal of a portion of a
line of business. All significant intercompany balances and
transactions have been eliminated.
Cash Equivalents: Cash equivalents are all highly liquid
investments maturing in three months or less when purchased.
Restricted Cash: Restricted cash is cash on deposit with
foreign banks, subject to certain foreign restrictions, and
collateral for domestic letters of credit relating to film rights
obligations (1994) and reserves for film production contingencies
(1995). Such restricted cash is expected to be available to the
Company within 12 months of the balance sheet date.
Accounts Receivable Allowances: Accounts receivable are net
of allowances for doubtful accounts, sales returns and advertising
credits (1994). The accrual for returns and advertising costs are
net of accounts receivable (1995).
Inventory Valuation: LFM's inventory of duplicated
videocassettes and boxes is stated at the lower of actual cost or
market. All other inventories, which consist of videocassettes and
accessories, are stated at the lower of cost or market determined
by using an average cost which approximates the first-in, first-out
(FIFO) method.
Depreciation and Amortization: Property and equipment are
stated at cost and are depreciated over their estimated service
lives using accelerated and straight-line methods. Leasehold
improvements are amortized over the lesser of their estimated
useful lives or the terms of the related leases.
Film Rights: Acquisition, production, print and advertising
costs (which benefit future periods) are capitalized as film
rights. Film rights are stated at the lower of unamortized cost or
estimated net realizable value. In accordance with Financial
Accounting Standards Board Statement No. 53, the individual film
forecast method is used to amortize film rights. Costs accumulated
in the acquisition, production and distribution of a film are
amortized in the proportion that gross revenues realized bear to
management's estimate of the total gross revenues expected to be
received. Estimated liabilities for residuals and participations
are accrued and expensed in the same manner as film rights are
amortized. Where film rights are acquired from producers for a
guaranteed minimum payment and the producer retains a participation
in the film profits, the film profits are allocated to the Company
until the guaranteed minimum payment is recovered, after which the
producer's share is accrued.
Revenue estimates on a film by film basis are reviewed
periodically by management and are revised, if warranted, based
upon management's appraisal of current market conditions. Based on
this review, if estimated future gross revenues from a film are not
sufficient to recover the unamortized film costs, other direct
distribution expenses, and participations, the unamortized film
cost shall be written down to net realizable value. In unusual
cases, such as a change in public acceptance of certain types of
films or actual costs substantially in excess of budgeted costs, a
write-down to net realizable value may be required before the film
is released.
Goodwill: Goodwill represents both the excess of
consideration paid for companies acquired in purchase transactions
over the estimated fair value of the net assets of such companies
and the application of pushdown accounting associated with the
purchase of LFM by Carolco Pictures Inc. ("Carolco") in 1986.
Goodwill is being amortized principally on a straight-line basis
over periods ranging from 7 to 30 years. The recoverable goodwill
balance relating from the acquisition of VCL (1994) has been re-classified
and included in "Assets Held For Sale." It is the Company's policy to
evaluate goodwill and recognize impairment if it is probable that the
recorded amounts are not recoverable from future cash flows.
Income Taxes: The Company records its income tax provision in
accordance with the Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No. 109"). Prior to the
adoption of SFAS No. 109, income tax expense was determined using
the liability method prescribed by Statement of Financial
Accounting Standards No. 96 ("SFAS No. 96"), which was superseded
by SFAS No. 109. Among other changes, SFAS No. 109 changed the
recognition and measurement criteria for deferred tax assets
included in SFAS No. 96. Adoption of SFAS No. 109 has had no
material impact on the Company's financial position or results of
operations.
Deferred income taxes are provided on transactions which are
reported in the financial statements in different periods than they
are for income tax purposes. Current and deferred taxes are
provided based on filing a consolidated tax return for federal
income tax purposes and combined state tax returns where permitted
by state taxing authorities. Income taxes for foreign subsidiaries
are provided based upon the applicable statutory rates of the
respective jurisdictions.
Revenue Recognition: Minimum guaranteed amounts from
theatrical exhibition and revenues from home video, free television
and pay television license agreements are recognized in accordance
with Financial Accounting Standards Board No. 53, when the license
period begins for each motion picture, the license fee and cost of
each picture are known, such motion pictures have been accepted and
are available pursuant to the terms of the noncancelable license
agreements and the collectability of the full license fee is
reasonably assured. Revenues from theatrical exhibition in excess
of minimum guaranteed amounts are recognized during the period of
exhibition. Cash collected in advance of the time of availability
is recorded as advance collections on contracts.
<PAGE>
Once completed, a typical theatrical film will generally be
made available for license as follows:
Months After Approximate
Marketplace Initial Release Release Period
Domestic theatrical ---- 1-6 months
Domestic home video 4-6 months ----
Domestic pay-per-view 6-9 months 3 months
Domestic pay television 10-18 months 12-21 months
Domestic network/basic cable 30-36 months 18-36 months
Domestic syndication 30-36 months 3-15 years
Foreign home video 6-12 months ----
Foreign television 18-24 months 18-30 months
Sales Revenue and Returns Recognition: Revenue from sales is
generally recognized upon delivery to the customer. However, in
accordance with industry practice, certain sales are made with the
right to return unsold items. An allowance is provided for the
gross profit impact of future sales returns, which reduces sales
and cost of goods sold accordingly.
Net (Loss) Income Per Common Share: (Loss) income per common
share is based on the weighted average number of common and common
equivalent shares outstanding during the periods. Common
equivalent shares, consisting of outstanding stock options and
warrants, and convertible preferred stock are not included in 1993
and 1994 calculations as they are antidilutive. Primary per share
information has been determined on the basis of 2,417,801,
2,418,003 and 2,436,309 weighted average shares outstanding for the
years ended December 31, 1993, 1994 and 1995, respectively. The
net (loss) income per common share for the year ended December 31,
1994 and 1995 gives effect to the accretion of the redemption value
of the Series B Cumulative Convertible Preferred Stock (the "Series
B Preferred Stock") of $6,000,000 and $4,509,000 respectively. The
net (loss) income per common share for the years ended December 31,
1993, 1994 and 1995 gives effect to total dividends on both the
Series B Preferred Stock and the Series C Convertible Preferred
Stock (the "Series C Preferred Stock") of $3,589,000, $3,791,000
and $3,027,000, respectively. Fully diluted per share information
for the year ended December 31, 1995 has been determined on the
basis of 20,541,896 weighted average number of shares outstanding,
assuming conversion of the Series B Preferred Stock and the Series
C Preferred Stock.
Foreign Currency Translation: The Company's foreign
subsidiaries use the local currency as the functional currency.
The assets and liabilities are translated into U.S. dollars at
year-end exchange rates. Revenues and expenses have been
translated into U.S. dollars based generally on the average rates
prevailing during the period. Gains and losses resulting from
foreign currency transactions were not significant during 1993,
1994 and 1995.
Concentration of Credit Risk: The Company sells film
properties and videocassettes to wholesalers, retailers and
consumers worldwide. Sales by LFM are made to customers
nationwide. Sales by LI are made to customers in various
territories worldwide. Credit is extended to wholesalers and
retailers based on an evaluation of the customer's financial
condition, and generally collateral is not required. Credit losses
are provided for in the financial statements and consistently have
been within management's expectations. Credit risk relating to the
sale and distribution of videocassettes by Warner-Elektra-Atlantic
Corporation ("WEA") to LFM's customers has been assumed by WEA
under the terms of a three-year distribution agreement (see Note
7).
The Company places its temporary cash investments with high
credit quality financial institutions and limits the amount of
credit exposure to any one financial institution. Generally, the
investments made mature within 30 to 90 days and therefore are
subject to little risk. The Company has not incurred any losses
related to these investments.
Fair Values of Financial Instruments: At December 31, 1995,
the carrying value of the Company's financial instruments, which
consist primarily of debt, approximates the fair value thereof.
Fair value of publicly held debt has been determined based on
quoted market prices.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Stock Based Compensation: The Company accounts for its stock
compensation arrangements under the provision of APB 25,
"Accounting for Stock Issued to Employees," and intends to continue
this method of accounting.
Re-classification: Certain re-classifications were made to
the 1993 and 1994 financial statements to conform to the 1995
presentation.
Note 2 - Series C Preferred Stock
On March 23, 1993, Pioneer Entertainment (USA) L.P., formerly
Pioneer LDCA, Inc., ("Pioneer") received 15,000 shares of the
Company's Series C Preferred Stock, par value $1.00 per share and
in 1995 transferred these shares to its parent company, Pioneer
Electronic Corporation ("PEC").
The Series C Preferred Stock bears a cash dividend rate of 5%
($50 per share) per annum, payable semi-annually on June 30 and
December 31 of each year. Although dividends were accrued by the
Company during 1993, 1994, and 1995, the June 30 and December 31,
1993, 1994, and 1995 dividends totaling approximately $2,207,000
($147.13 per share) (including dividends on the unpaid dividends)
were not paid due to restrictions imposed on the Company by the
terms of the Series B Preferred Stock, which prohibit the payment
of dividends on the Series C Preferred Stock unless the aggregate
amount of such dividends, together with all cash dividends paid on
the Series B Preferred Stock, does not exceed the net income of the
Company (adding back specified net worth exclusions) since the
March 23, 1993 date of issuance of the Series C Preferred Stock and
the Series B Preferred Stock. The Company has realized cumulative
consolidated net losses since the Series C Preferred Stock and the
Series B Preferred Stock were issued. Thus, pursuant to the terms
of the Series B Preferred Stock, the Company is prohibited from
paying the June 30 and December 31, 1993, 1994, and 1995 cash
dividends on the Series C Preferred Stock.
The Series C Preferred Stock ranks junior to the Series B
Preferred Stock and senior to all other classes of stock of the
Company. The Series C Preferred Stock is convertible into
1,130,170 shares of common equity of the Company (either Common
Stock or Series A Common Stock). The number of shares into which
the Series C Preferred Stock is convertible was determined by
dividing the $15,000,000 liquidation preference plus accrued
dividends of approximately 2,207,000 of the Series C Preferred
Stock by $15.225, which was 140% of the average closing price of
the Company's Common Stock for the ten trading days ending March
18, 1993, the date that was three business days prior to the
completion of the Company's financial restructuring on March 23,
1993 ("Restructuring"). Holders of the Series C Preferred Stock
are entitled to vote with the holders of Common Stock generally
with each share entitled to as many votes as the number of shares
of Common Stock into which it may be converted. The Series C
Preferred Stock, in combination with the Company's Common Stock
owned by PEC, represents approximately 49.8% of the voting equity of
the Company (see Note 12). The Series C Preferred Stock may only be
redeemed in certain limited circumstances in the event of increases in the
trading price of the Company's Common Stock or in the event of a
merger of the Company with another entity.
Note 3 - Discontinued Operations
On August 31, 1994, LIVE sold its entire interest in its
Specialty Retail Division, which consisted of its formerly wholly
owned subsidiary, Strawberries Inc. ("Strawberries") and
Strawberries' wholly owned subsidiary, Waxie Maxie Music Co.
("Waxie Maxie") to a group including Castle Harlan, Inc., the
President of the Specialty Retail Division, and other senior
managers of the Specialty Retail Division. The purchaser group
also included Jefferson Capital Group, Ltd. ("Jefferson Capital").
The total purchase price paid to LIVE for the Specialty Retail
Division was $35,000,000 in cash, resulting in a loss on disposal
of $23,773,000, which was accrued in 1993.
In March 1994, primarily as a result of the Company's desire
to focus its efforts on its core entertainment business, the Board
of Directors of the Company decided to dispose of the Company's
interest in VCL. In February 1995, the Company and certain of its
affiliates, on the one hand, and Datty Ruth, the owner of 19% of
VCL, and Apricot Computer GmbH ("Apricot"), on the other, entered
into a preliminary agreement whereby the Company's 81% interest in
VCL, as well as all receivables owed by VCL to the Company or its
affiliates, would be transferred to Ruth and Apricot. The total
consideration to be received by the Company and its affiliates in
connection with such transactions was approximately $7,444,000, of
which approximately $3,100,000 was received in February 1995. The
remaining $4,344,000 was received in November 1995, and a gain of
approximately $2,913,000 was reflected in the quarter ended
September 30, 1995, resulting from the completion of this
transaction.
Accordingly, the Company's interest in the Specialty Retail
Division as of December 31, 1993 and VCL as of December 31, 1993 and
1994, have been recorded as "Assets Held For Sale," and
"Liabilities Related To Assets Held For Sale" and have been
written down to their estimated net realizable values. The
operating statements presented, separately disclose the results of
operations of VCL and account for the Specialty Retail Division as
a discontinued operation in 1993. The losses on disposal of the
Specialty Retail Division and VCL include provisions for operating
losses during the phase out period of $2,024,000 and $3,885,000,
respectively as of December 31, 1993. "Assets Held For Sale"
consist primarily of accounts receivable, inventories, properties,
equipment and video rights. "Liabilities Related To Assets Held
For Sale" consist primarily of accounts payable, accrued expenses,
debts and video obligations. Corporate general and administrative
expenses have not been allocated to either entity.
The Specialty Retail Division's revenues for the year ending
December 31, 1993 and the seven months ended August 31, 1994 were,
$106,124,000 and $57,846,000, respectively. Income/(losses) from
operations for the same periods were, $1,690,000 and ($3,339,000)
which was accrued in 1993, respectively, net of provision for
income taxes of $632,000 and $100,000, respectively.
Note 4 - Foreign Operations
For the year ended December 31, 1993, net revenues, operating
losses and identifiable assets relating to foreign operations were
$34,009,000, ($3,289,000) and $28,871,000, respectively. For the
year ended December 31, 1994, net revenues, operating profits and
identifiable assets relating to foreign operations were
$26,629,000, $2,945,000 and $33,262,000, respectively. At December
31, 1993 and 1994 the assets of VCL have been included in "Assets
Held For Sale." For the year ended December 31, 1995, net revenues
and operating profits relating to foreign operations were
$32,257,000 and $8,775,000.
Note 5 - Film Rights
The components of film rights are as follows:
December 31,
1994 1995
(In Thousands)
Titles released. . . . . . . . . . . . . . $491,576 $535,145
Less amortization. . . . . . . . . . . . . (466,260) (514,669)
25,316 20,476
Titles not released, masters received. . . 36,960 19,819
Advances paid, masters not received. . . . 8,832 26,405
TOTAL FILM RIGHTS . . . . . . . . . . . $ 71,108 $ 66,700
The Company estimates that 79% of its film rights will be amortized during
the three years ending December 31, 1998.
Note 6 - Property and Equipment
The components of property and equipment are as follows:
December 31,
1994 1995
(In Thousands)
Building and improvements. . . . . . . . . $ 447 $ 456
Equipment and furniture. . . . . . . . . . 6,128 6,578
6,575 7,034
Less accumulated depreciation and amortization (5,175) (5,889)
$ 1,400 $ 1,145
Note 7 - Debt and Other Financing
Debt and other financing consist of the following:
December 31,
1994 1995
(In Thousands)
Distribution agreements. . . . . . . . . . $ 3,333 $ 8,333
Increasing Rate Senior Subordinated Notes
due 1999 (see Note 10), including
capitalized interest of $16,871 (1994)
and $13,184 (1995). . . . . . . . . . . . 56,871 53,184
$60,204 $61,517
<PAGE>
LIVE and its affiliates are a party to a three-year $30,000,000
revolving credit facility with Foothill Capital Corporation (the
"Foothill Credit Facility") expiring November 16, 1997. Borrowings
available under the Foothill Credit Facility are limited to
$27,500,000 until additional participant lenders are added to the
Facility, at which time the borrowings available will be increased
to a maximum $30,000,000. Borrowings under the Foothill Credit
Facility are determined under a borrowing base calculation, which
includes certain allowable accounts receivable, film rights and
inventory balances, and are secured by substantially all of the
assets of LIVE and its subsidiaries. Outstanding borrowings under
the Foothill Credit Facility bear interest at the rate of 2% per
annum above the highest of the Bank of America, Mellon Bank or
Citibank prime rate, payable monthly. In no event will interest
under the Foothill Credit Facility be less than 7% per annum. The
Foothill Credit Facility provided for a closing fee of $500,000, an
annual facility fee of 1/4 of 1% and a commitment fee of 1/4 of 1%
on any unused amount. The Foothill Credit Facility also requires
LIVE to meet certain financial ratios, and as of December 31, 1995,
the Company was in compliance with all such financial ratios.
There were no amounts outstanding under the Foothill Credit
Facility as of December 31, 1995.
On May 27, 1995, LFM entered into a three year extension of its
distribution agreement originally signed in May 1992 with WEA.
Under the terms of the extension, WEA advanced $10,000,000 to LFM
($20,000,000 had been advanced under the original agreement and
repaid entirely prior to the 1995 extension), recoupable from
distribution revenues during the three year term of the agreement
at $277,778 per month, including interest at LIBOR, plus 0.2%. In
order to obtain the advance, LFM granted WEA a second priority
security interest in substantially all the LFM's assets. At
December 31, 1994 and 1995 there was $3,333,000 and $8,333,000,
respectively, outstanding related to the WEA advances. The interest rate
on the advance at December 31, 1995 was 6.075%.
The future maturities of long-term obligations are as follows:
Year Ending December 31, (In Thousands)
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,341
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,425
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,503
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,247
$ 61,516
Interest paid for the years ended December 31 1993, 1994 and
1995 was $9,190,000, $8,621,000, and $5,131,021 respectively,
including $964,000, $787,000, and $28,482 related to the Company's
discontinued operations.
<PAGE>
Note 8 - Leases
The Company generally conducts its operations through leased
office facilities. The Company also leases automobiles, computer
equipment, furniture, fixtures and other equipment. Most leases
require that the Company perform all necessary repairs and
maintenance, provide insurance and pay taxes assessed against the
leased property. The terms of leases range from month-to-month to
four years, some of which have renewal options. Certain rents are
adjusted for increases based upon the Consumer Price Index. The
leases are classified as operating leases.
Future minimum operating lease payments for the Company, as of
December 31, 1995 are:
(In Thousands)
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 909
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 911
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 909
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 478
Total net minimum lease payments . . . . . . . . . . . . . $3,207
For the years ended December 31, 1993, 1994 and 1995, rent
expense under all operating leases aggregated $7,953,000,
$6,685,000, and $1,812,000 respectively, including $6,548,000,
$5,213,000, and $878,000 related to the Company's discontinued
operations.
Note 9 - Film Rights Obligations
At December 31, 1995, the unrecorded future obligation for
undelivered film product approximates $20,851,417. Deposits made
for guaranteed delivery of undelivered film product are recorded as
film rights.
Certain agreements permit a reduction in the amount of film
right payments when stipulated conditions have not been met. Many
agreements also contain an obligation for the payment of royalties
above the minimum guarantee if sales exceed a stipulated amount.
At December 31, 1995, $15,585,104 of royalties payable are included
in film rights obligations.
Note 10 - Increasing Rate Senior Subordinated Notes Due 1999
On March 17, 1993, the United States Bankruptcy Court for the
Central District of California (the "Bankruptcy Court") confirmed
a prepackaged plan of reorganization (the "Prepackaged Plan") for
LIVE, providing for the issuance of $40,000,000 in principal amount
of Increasing Rate Senior Subordinated Notes due 1999 (the "LIVE
Increasing Rate Notes"). The LIVE Increasing Rate Notes mature on
March 23, 1999. Interest accrued on the LIVE Increasing Rate Notes
from September 1, 1992 at 10% per annum and was scheduled to
increase to 12% on March 23, 1996. The LIVE Increasing Rate Notes
are governed by the terms of an Indenture between the Company and
American Stock Transfer & Trust Company, as Trustee (the "Indenture").
LIVE believed that at the end of 1994 it may have
been in violation of the minimum consolidated net worth covenant
contained in the Indenture. Such default would have permitted the
trustee thereunder or holders of 25% in aggregate principal amount
of the LIVE Increasing Rate Notes to give notice and accelerate
maturity of the indebtedness represented by the LIVE Increasing
Rate Notes. In November 1994, a majority of the holders of the LIVE
Increasing Rate Notes agreed to eliminate the minimum net worth
covenant contained in the Indenture, thereby removing the possibility
that LIVE might have defaulted under that covenant in 1995. As part of
the amendment of the Indenture, LIVE agreed to increase
the interest rate on the LIVE Increasing Rate Notes from 10% per
annum to 12% per annum effective October 18, 1994. Payment of the
LIVE Increasing Rate Notes is secured only by a lien on the Common
Stock of LFM, subject and subordinate to a lien under the Foothill
Credit Facility and is subordinated to all of the Company's present
and future senior debt. The LIVE Increasing Rate Notes are subject
to mandatory redemption of $20,000,000 of the principal amount on
March 23, 1998 and are redeemable at any time at par plus accrued
interest.
The Indenture restricts the ability of the Company and
its Restricted Subsidiaries (as defined) to incur additional senior
debt and subsidiary senior debt, to make restricted payments and
restricted investments, to merge, consolidate or sell assets of the
Company or its Restricted Subsidiaries, to create liens other than
to secure senior debt, subsidiary senior debt and certain other
permitted debt, or to enter into certain transactions with
affiliates of the Company.
Interest to maturity on $30,055,000 of the LIVE Increasing
Rate Notes of $16,871,000 and $13,184,000 at December 31, 1994 and
1995, respectively, has been included in the carrying value of the
LIVE Increasing Rate Notes, in accordance with Financial Accounting
Standards Board Statement No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructurings," and will not be
recognized as interest expense in current and future years.
Note 11 - Income Taxes
As discussed in Note 1, the Company records its income tax
provision in accordance with SFAS No. 109.
(Loss) Income From Continuing Operations Before Income Taxes is as
Follows:
December 31,
1993 1994 1995
(In Thousands)
Domestic . . . . . . . . . . . . . . . . . $ (8,037) $ (7,945) $ 11,391
Foreign. . . . . . . . . . . . . . . . . . (19,404) (1,529) --
$(27,441) $ (9,474) $ 11,391
Income Tax Expense (Benefit) From Continuing Operations
December 31,
1993 1994 1995
(In Thousands)
Currently payable:
Federal. . . . . . . . . . . . . . . . . $ 453 $ -- $ 108
State. . . . . . . . . . . . . . . . . . 332 (494) 172
Foreign. . . . . . . . . . . . . . . . . 54 70 --
839 (424) 280
Deferred:
Federal. . . . . . . . . . . . . . . . . 411 624 48
State. . . . . . . . . . . . . . . . . . (482) -- 272
(71) 624 320
$ 768 $ 200 $ 600
<PAGE>
Components of Deferred Income Taxes
December 31,
1993 1994 1995
(In Thousands)
Film rights. . . . . . . . . . . . . . . . $ (71) $ 368 $ 13
Sales returns and other allowances 1 35 290
Accelerated depreciation and basis reduction 2 3 (2)
Accruals not currently deductible for tax
purposes (8) 218 19
Other. . . . . . . . . . . . . . . . . . . 5 -- --
$ (71) $ 624 $ 320
Reconciliation of Effective Rate of Income Taxes
Percentage of Income (Loss)
December 31,
1993 1994 1995
Restated tax provision . . . . . . . . . . $ 768 $ 200 $ 600
Book (loss) income . . . . . . . . . . . . (27,441) (9,474) 11,391
Effective tax rate . . . . . . . . . . . (2.8)% (2.1)% 5.3%
Federal statutory rate . . . . . . . . . . 35.0% 35.0% 35.0%
State income taxes . . . . . . . . . . . . (0.4) (3.0) 3.9
Alternative minimum tax effect, other (4.4) (1.2) (1.2)
Utilized net operating loss. . . . . . . . (26.9) (17.6) (4.5)
(Loss) income related to foreign operations (0.2) (0.7) (49.2)
Foreign deemed dividend. . . . . . . . . . (0.9) (0.1) 9.2
Goodwill amortization. . . . . . . . . . . (5.0) (14.5) 12.1
Effective tax rate . . . . . . . . . . . (2.8)% (2.1)% 5.3%
Components of Deferred Tax Liabilities and Assets
1995
Deferred tax liabilities:
Amortization of film rights and other. . $ (8,451)
Total deferred tax liabilities. . . . . (8,451)
Deferred tax assets:
Sales returns and other allowances . . . 726
Accelerated depreciation . . . . . . . . 139
Accruals not currently deductible. . . . 322
Other. . . . . . . . . . . . . . . . . . 79
Tax basis difference - debt. . . . . . . 4,614
5,880
Less valuation allowance . . . . . . . . (4,013)
Net deferred tax assets. . . . . . . . . 1,867
Total deferred tax assets/(liabilities) $ (6,584)
Income taxes paid for the years ended December 31, 1993, 1994
and 1995 were $1,766,000, $1,456,000, and $421,936 respectively,
including $230,000 and $580,000, related to the Company's
discontinued operations in 1993 and 1994. The valuation allowance
has decreased $14,750,000, from $18,763,000 at December 31, 1994 to
$4,013,000 at December 31, 1995 primarily due to fluctuations in
temporary differences.
At December 31, 1993, the cumulative undistributed earnings
of the Company's foreign subsidiaries of approximately $4,400,000
were deemed remitted as a dividend in accordance with certain
provisions of the U.S. Internal Revenue Code ("I.R.C."). During
1994 and 1995, $3,874,000 and $3,000,000 of undistributed earnings
of the Company's foreign subsidiaries were deemed remitted as a
dividend in accordance with the provisions referred to above. The
related taxes were provided for these deemed dividends in the
Company's U.S. tax provision. Effective September 13, 1994 LEI-IVE
Entertainment N.V. was domesticated as a Delaware corporation under
the name LIVE Entertainment International Inc. Such reorganization
did not result in United States or California tax liability to the
Company.
On March 17, 1993, the Bankruptcy Court confirmed the
Prepackaged Plan. In accordance with the I.R.C., this
reorganization has caused a "change in ownership" which will result
in a limitation on the future utilization of the Company's net
operating loss carryforwards beginning with the year ending
December 31, 1993. The annual limitation is approximately
$1,600,000 per year subject to certain increases relating to built-in
gain items.
At December 31, 1995, approximately $36,000,000 of net
operating loss carryforwards are available for regular federal tax
return purposes. In accordance with Section 108 of the I.R.C., the
Company was required to reduce its "tax attributes" due to the
confirmation of the Prepackaged Plan. This resulted in the
reduction of net operating loss carryforwards by approximately
$35,000,000. Remaining federal net operating losses of $36,000,000
for regular income tax purposes, of which $31,000,000 are subject to
annual limitations as described above, will expire between the
years 2006 and 2009. State net operating loss carryforwards were
$13,000,000 prior to the reduction in "tax attributes." This
amount was fully absorbed after the reduction in "tax attributes"
due to the confirmation of the Prepackaged Plan, resulting in the
elimination of all net operating losses for state tax purposes.
For federal Alternative Minimum Tax ("AMT") return purposes,
$7,000,000 of net operating loss carryforwards are available after
the reduction in "tax attributes." AMT net operating loss
carryforwards will expire between 2006 and 2009. AMT credits of
$2,000,000 and foreign tax credits of $600,000 are available to
offset future regular federal income tax liabilities. The disposal
of the Specialty Retail Division on August 31, 1994 resulted in a
capital loss of approximately $30,000,000 for regular tax purposes
and $31,600,000 for AMT purposes, which may be carried forward, but
expire in 1999. State capital loss carryforwards are $20,000,000
which expire in 1999.
The Company is currently under examination by the Internal
Revenue Service for the years ended 1989 through 1991 and by the
California Franchise Tax Board for the years ended 1988 through
1990.
Note 12 - Stockholders' Equity
On December 9, 1994, the Company filed with the Delaware
Secretary of State a Certificate of Amendment (the "Certificate of
Amendment") to the Company's Restated Certificate of Incorporation
(the "Restated Certificate"), amending Article FOURTH of the
Restated Certificate to reclassify every five outstanding shares of
its common stock, par value $.01 per share ("Prior Common Stock"),
as one share of the Company's common stock having the same par
value and other powers, preferences and rights as the Prior Common
Stock (such shares of reclassified Prior Common Stock are sometimes
hereinafter referred to as shares of "Common Stock") (the "Reverse
Stock Split").
<PAGE>
The Reverse Stock Split was approved by the affirmative
written consent of holders of over 64% of the Prior Common Stock
and the Company's Series C Preferred Stock, voting together as a
single class, pursuant to a Consent Solicitation Statement dated
November 23, 1994. Only holders of record of the Prior Common
Stock and Series C Preferred Stock at the close of business on
October 31, 1994 were entitled to consent to the Reverse Stock
Split. All share amounts indicated herein have been adjusted to
reflect the retroactive application of such Reverse Stock Split.
The Series B Preferred Stock has a liquidation value of $10.00
per share. Holders of the Series B Preferred Stock are entitled to
an annual dividend, payable quarterly, which accrues from September
1, 1992 at 5% ($0.50 per share) if paid in cash or 8% if paid in
kind ("PIK") and increases on May 1, 1996 to 10% ($1.00 per share)
if paid in cash and 12% if PIK. Dividends of $3,000,000 ($0.50 per
share) in each of 1993 and 1994, and $2,198,000 ($0.37 per share)
in 1995 were accrued on the Series B Preferred Stock and were paid
beginning in March 1993 and quarterly thereafter. The Company may
redeem the Series B Preferred Stock at any time at 100% of the
liquidation value
Although LIVE has no obligation to redeem any Series B
Preferred Stock, subject to the availability of funds and the prior
approval of its Board of Directors and its lenders, LIVE may
acquire shares of its Series B Preferred from time to time, either
through private purchases or through open market purchases. On
December 9, 1994, and March 7, 1995, LIVE acquired, and
subsequently retired, 400,000 shares and 1,400,000 shares,
respectively, of the Series B Preferred Stock at average prices
under $4.00 per share. In addition, in March 1996 the Company
purchased 377,500 shares of the Series B Preferred Stock at an
average price of approximately $6.00 per share.
Holders of the Series B Preferred Stock are entitled to elect
two directors, and in certain circumstances, up to four members, or
under certain other circumstances, a majority of the Company's
Board of Directors. No other voting rights exist. In addition,
commencing May 1, 1996, or earlier if the Company has elected to
pay PIK dividends for a total of four quarters, holders can convert
the Series B Preferred Stock into LIVE Common Stock. The
conversion price per share is obtained by dividing the liquidation
value by either the market price of the Common Stock or the "Floor
Price." The Floor Price is initially $20.00 per share of Common
Stock, decreasing $1.25 per share at the end of each three month
period thereafter. On September 1, 1998, the conversion price will
be reset to the lower of the market price or $5.00 per share,
resulting in the potential issuance of a minimum of approximately 7,600,000
shares of the Company's Common Stock based upon the number of Series B
Preferred Stock shares outstanding as of March 15, 1996.
The Company's Stock Option and Stock Appreciation Rights Plan
(the "Plan") provides for the granting of incentive stock options,
non-qualified stock options and stock appreciation rights ("SARs")
to its officers, directors, key employees, consultants and other
persons. Options to purchase a maximum of 300,000 shares of the
Company's Common Stock, of which 120,000 may be granted as SARs,
are available under the Plan. In March 1994, the Company's Board
of Directors resolved, and the Company's stockholders subsequently
approved, to increase the maximum number of shares which may become
available under the Plan by 100,000 shares. The options vest over
varying periods and expire in 10 years.
On February 7, 1996, the Stock Option Committee of the Board
of Directors granted to certain current employees of LIVE and LFM
a total of 92,400 options at the exercise price of $3.50, the
closing price of the Common Stock on The Nasdaq Stock Market's
Small Cap Market on that day. The options vest ratably over
periods ranging from two to three years.
<PAGE>
On March 6, 1995, the Stock Option Committee of the Board of
Directors granted to all current employees and Directors of LIVE
and LFM (other than members of the Stock Option Committee) who were
holders of options pursuant to the Company's 1988 Stock Option and
Stock Appreciation Rights Plan, as amended (the "1988 Plan"), the
option to agree to cancel certain options (the "Canceled Options")
and to receive in return therefor new options (the "New Options")
pursuant to the 1988 Plan, all on the following terms and
conditions: (i) the exercise price for the New Options would equal
$3.50, the closing price of the Common Stock on the SmallCap Market
on March 6, 1995, (ii) fifty percent (50%) of the New Options would
vest on March 6, 1996; the remainder would vest on March 6, 1997,
provided that no New Options would vest earlier than the scheduled
vesting date for the corresponding Canceled Options, and (iv) all
New Options would expire on the expiration date of the
corresponding Canceled Options.
A summary of stock option transactions during the three years
ended December 31, 1995 follows:
Number of Option Price
Shares Per Share
($)
Stock options outstanding:
December 31, 1992. . . . . . . . . . 136,480 9.38-70.00
Canceled . . . . . . . . . . . . . (24,130) 9.38-70.00
Granted. . . . . . . . . . . . . . 185,860 8.75-13.75
December 31, 1993. . . . . . . . . . 298,210 8.75-70.00
Canceled . . . . . . . . . . . . . (86,380) 8.75-70.00
Granted. . . . . . . . . . . . . . 86,570 2.75-15.63
December 31, 1994. . . . . . . . . . 298,400 8.75-70.00
Canceled . . . . . . . . . . . . . (297,720) 3.50-15.63
Granted. . . . . . . . . . . . . . 275,140 2.75- 4.25
December 31, 1995. . . . . . . . . . 275,820 2.75-14.38
At December 31, 1995, 23,300 options were exercisable, at an
average exercise price of $6.55 per share, and no stock
appreciation rights were outstanding. Options to purchase 77,590
(1993), 76,860 (1994), and 99,860 (1995) shares of the Company's
Common Stock were available for grant under the Plan.
Warrants to purchase 9,900 shares of the Company's Common
Stock were issued during 1990 and were outstanding as of December
31, 1995. These warrants are currently exercisable at prices
ranging from $71.25 to $72.50 per share (fair market value at the
date of grant) and expire over varying periods through 2000.
In 1993, the Company issued warrants to purchase 266,666 and
200,000 shares of the Company's Common Stock at a price of $10.00
and $13.60 per share, respectively. The warrants are exercisable
until March 1998 and the holders have been granted demand and
piggyback registration rights for the Common Stock underlying the
Warrants.
<PAGE>
Note 13 - Stockholders' Rights Plan
In July 1990, the Board of Directors of LIVE adopted a
Stockholders' Rights Plan and declared a dividend of one preferred
stock purchase right (a "Right") for each outstanding share of
Company Common Stock. Among other provisions, each Right may be
exercised to purchase one one-hundredth share of LIVE's Series R
Junior Participating Cumulative Preferred Stock at an exercise
price of $90, subject to adjustment (the "Exercise Price"). The
Rights may only be exercised after a party, exclusive of LIVE,
Carolco or their affiliates, has acquired or obtained the right to
acquire 20% or more of the Company's Common Stock or in the event
certain mergers or sales of assets by LIVE occur. The Rights,
which do not have voting rights, expire on July 19, 2000 and may be
redeemed by the Company at a price of $.01 per Right at any time
prior to their expiration or the acquisition of 20% of the
Company's Common Stock by any person other than LIVE, Carolco or
their affiliates.
In the event a party other than LIVE, Carolco or their
affiliates acquires 20% or more of the Company's outstanding Common
Stock in accordance with certain defined terms, each Right will
entitle its holder to purchase, at the Right's then Exercise Price,
a number of shares of Company Common Stock having a market value of
twice the Right's Exercise Price. The independent directors of
LIVE may elect to exchange the Rights at an exchange ratio of one
share of Company Common Stock per Right upon the occurrence of
certain defined acquisition events. If certain mergers or sales of
assets by LIVE occur, each Right shall entitle the holder to
purchase, at the Exchange Price, a number of shares of common stock
of the surviving corporation or purchaser (so long as it is not
LIVE) having a market price of two times the Exercise Price.
Note 14 - Related Party Transactions
Revenues generated by LFM from Carolco titles amounted to
15.6%, 5.5%, and 7.2% of net sales for the years ended December 31,
1993, 1994 and 1995, respectively. As of December 31, 1993, the
Company had a note receivable from Carolco bearing interest
aggregating $8,047,000. In December 1992, the Company, Carolco and
certain of their affiliates reconciled the amounts owing to each by
the others (the "Reconciliation Agreement"). In December 1994, as
part of an agreement settling all open accounts between them,
including those that arose as a result of the Reconciliation
Agreement, LIVE and Carolco agreed that all individual films
previously delivered to LFM or LI under either the Domestic Master
Agreement or the German Master Agreement would no longer be
cross-collateralized with other films, either within individual packages
or among so called "film packages"; the companies also agreed that
for purposes of their settlement only, all such films would be
deemed to have earned the minimum distribution fee that was
guaranteed to LFM and LI. In connection with this Reconciliation
Agreement in 1994, LIVE wrote off the remaining unpaid receivable
amount of $6,211,000 that LIVE had recorded in its financial
records as owing from Carolco (of which all but $2,177,000 was
reserved for in prior years).
Pursuant to an agreement dated October 1995, which amended and
extended an original agreement dated October 1991, LFM granted
Pioneer a license for United States laser videodisc rights to LFM's
library of motion pictures (subject to certain reserved rights) for
a term ending in September 1998. Pioneer will pay LFM a total of
$4,600,000 ($2,300,000 upon signing and $2,300,000 on January 1,
1997) under this agreement as a non-returnable advance recoupable
on a cross-collateralized basis from all royalties payable to LFM
under the agreement.
In July 1994, a subsidiary of LFM and an affiliate of Pioneer
reached an agreement whereby the Pioneer affiliate will receive the
Japanese theatrical, video and television distribution rights to
the films Wagons East, Top Dog, The Beans of Egypt, Maine and Goldy
III.
In July 1994, Carolco and an affiliate of Le Studio Canal+
S.A. ("Le Studio"), a greater than 5% owner of LIVE, reached an
agreement whereby the Le Studio affiliate received the rights in
certain French-speaking territories to the motion picture Wagons
East.
In July 1994, LFM and an affiliate of Le Studio executed a
definitive agreement whereby LFM licensed the United States and
Canadian video rights to the motion picture Stargate.
In January 1993, Jefferson Capital, an affiliate of a director
of the Company, received $500,000 for investment banking services
that were provided in connection with the Company's consideration
of a potential business combination of the Company and Carolco.
Additionally, $850,000 was paid in connection with the completion
of the Restructuring. In 1993, Jefferson Capital and the co-financial
advisor received a $150,000 non-refundable retainer to
assist the Company in structuring and placing a long-term working
capital facility for LFM and to make recommendations regarding the
Company's capital structure. In addition, each received warrants
to purchase 3,333 and 2,941 shares of the Company's Common Stock at
a price of $10.00 and $13.60 per share, respectively. In 1994
these parties assisted the Company in negotiating and obtaining the
Foothill Credit Facility and received a total fee of $300,000 for
such services.
In October 1994, LIVE retained Jefferson Capital as its
advisor in connection with LIVE's efforts to obtain the agreement
of the holders of the LIVE Increasing Rate Notes to eliminate the
minimum net worth covenant contained in the Indenture. Jefferson
Capital received a total fee of $200,000 (one half paid in October
1994 and the second half paid in November 1994) for investment
banking services provided in connection with such efforts.
Jefferson Capital's fee was not contingent upon the success of
LIVE's efforts to amend the Indenture. LIVE also agreed to
reimburse Jefferson Capital for its reasonable out-of-pocket
expenses, including legal fees, and to indemnify Jefferson Capital
against certain liabilities, including liabilities under the
federal securities laws, relating to or arising out of services
performed by Jefferson Capital for this engagement.
In August 1995, Jefferson Capital assisted the Company in
obtaining film project financing from a bank and received a total
fee of $50,000 for such services.
In connection with the Restructuring, a director of the
Company and Jefferson Capital received a total of $630,000, plus
expenses. The director received $92,000 of such amount.
Any and all agreements with Jefferson Capital were terminated
by the Company in May 1995.
In a July 1993 consulting agreement, the Company engaged a
director to provide consulting services as an independent
contractor in connection with the search by the Company for an
individual to become Chief Executive Officer of LIVE and LFM. The
fee for such service was $10,000 per month (pro rated for partial
months) plus expenses. This agreement terminated upon the hiring
of a President and Chief Executive Officer of the Company in
January 1994. The Company paid this same director a total of
$62,200 in consideration of his services under this agreement.
In 1993, the Company's Chairman of the Board was issued
warrants to purchase 2,941 shares of the Company's Common Stock at
a price of $13.60 per share.
<PAGE>
The Company and the Chairman of the Board are parties to an
agreement dated December 1993, pursuant to which the Company
agreed, for a term ending in December 1996, to pay the Chairman
$25,000 per month, plus normal directors expenses and other out-of-pocket
expenses he may incur in connection with his services to the
Company, in return for the Chairman making himself available to the
Company or any video subsidiary thereof to act as the Chief
Executive Officer's primary reporting person for the period ending
December 31, 1996. Such compensation is payable as long as the
Chairman makes himself available for such purpose, whether or not
the Company actually utilizes his services and whether or not any
particular Chief Executive Officer is in the Company's employ.
Note 15 - Incentive Savings Plan
The Company has established the LIVE Incentive Savings Plan,
a profit sharing and 401(k) savings plan, in which eligible
employees of LIVE and LFM may participate. Each employee who has
attained the age of 21 may become a participant as of the beginning
of each calendar quarter when such employee has completed 1,000
hours of service in the relevant one-year computation period. The
Company, at the discretion of the Board of Directors, may make
annual contributions to the LIVE Incentive Savings Plan. The
Company's profit sharing contributions are allocated to individual
accounts of participants in proportion to their compensation. A
participant is fully vested in his or her tax-deferred employee
contributions at all times. A participant whose employment
terminates for any reason other than death or disability is
entitled only to the vested portion of the contributions made by
the Company on behalf of the plan participant. The LIVE Incentive
Savings Plan permits tax-deferred voluntary employee contributions
of an amount equal to not more than 10% of compensation, to be
matched by a LIVE contribution in an amount equal to 50% of the
employee's voluntary contributions which do not exceed 6% of his or
her compensation. With certain exceptions, contributions made by
the Company vest equally over a period of four years. Company
contributions to the LIVE Incentive Savings Plan were $55,000,
$46,000, and $95,000 for the years ended December 31, 1993, 1994
and 1995, respectively.
Note 16 - Major Customers
During the year ended December 31, 1993, no one customer
accounted for more than 10% of the net sales of LIVE. During the
year ended December 31, 1994, two customers accounted for 23.3% of
net sales of LIVE and during the year ended December 31, 1995, two
customers accounted for 34.0% of net sales of LIVE.
Note 17 - Commitments and Contingencies
Employment and Separation Agreements:
The Company has employment agreements with certain of its
officers generally for a term of one to four years. Future minimum
payments under these contracts are approximately $2,413,000,
$1,812,000, and $93,000 for the years ending December 31, 1996,
1997 and 1998.
<PAGE>
Legal Proceedings:
On January 9, 1992, a purported class action lawsuit was filed
in the U.S. District Court, Central District of California, by
alleged stockholders of LIVE against LIVE, Carolco and certain of
LIVE's past and present directors and executive officers. The
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 promulgated thereunder (a) by concealing the
true value of certain of LIVE's assets, and overstating goodwill,
stockholders' equity, operating profits and net income in LIVE's
Form 10-K for the year ended December 31, 1990, in its 1990 Annual
Report and in its Forms 10-Q for the quarters ended March 31, 1991
and June 30, 1991, and (b) by materially understating the true
extent of the write off of goodwill in connection with the sale of
substantially all of the assets of LIVE's wholly owned subsidiary,
Lieberman Enterprises Incorporated ("Lieberman"), to Handleman
Company ("Handleman") in July 1991. In addition, the complaint
alleges that certain of the defendants are liable as controlling
persons under Section 20 of the Exchange Act and alleges that
certain other defendants are liable for aiding and abetting the
primary violations. Subsequently, two additional lawsuits were
filed in the U.S. District Court, Central District of California,
by alleged stockholders of LIVE against the same persons and
entities who were defendants in the original actions, making
substantially the same allegations as were made in the first
lawsuit. On March 30, 1992, these lawsuits were consolidated.
Further, in April 1992, an amended complaint was filed in the
consolidated action, lengthening the alleged class period and
adding as defendants certain additional officers, directors and
affiliates of LIVE and Carolco, including Pioneer, as well as a
lender to LFM and Carolco. On June 17, 1992, the U.S. District
Court, Central District of California, entered an order
conditionally certifying the class, subject to possible
decertification after discovery is completed. On January 27, 1993,
a second amended complaint was filed in the consolidated class
action making additional and modified allegations against certain
of the defendants claiming they are liable as controlling persons
under Section 20 of the Exchange Act and claiming that certain
other defendants are liable for aiding and abetting the primary
violations. On April 19, 1993, the court issued a ruling
dismissing defendant Pioneer from this lawsuit.
In February 1992, a purported class action lawsuit was filed
in the U.S. District Court, District of Delaware, by an alleged
holder of Carolco's public debt, against LIVE, Carolco and certain
directors and executive officers of Carolco. The Delaware
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder by concealing the true value of certain of LIVE's
assets, and overstating goodwill, stockholders' equity, operating
profits and net income in LIVE's Form 10-K for the year ended
December 31, 1990 and in its Forms 10-Q for the quarters ended
March 31, 1991 and June 30, 1991. In April of 1992 this lawsuit
was transferred to the U.S. District Court, Central District of
California. The proceedings are being coordinated with the
consolidated action described in the preceding paragraph. On July
17, 1992, the U.S. District Court, Central District of California,
entered an order conditionally certifying the class, subject to
possible decertification after discovery is completed.
The plaintiffs have taken no actions in either of these cases
for over one year and the Company has asked the Court to dismiss
both cases for non prosecution. There is no assurance that the
Company's motion will be granted.
In May 1994, a breach of contract claim was filed against a
subsidiary of the Company, claiming nonpayment of royalties from
licensing of films in foreign territories and deprivation of
royalty payments as a result of misallocation of certain values
asserted with licensed film properties. Films subject to the
complaint were contained in the assets of Vestron, Inc. purchased
by the Company in July 1991, and the period covered included the
license periods both prior to, and subsequent to , the acquisition
date by the Company. The Company filed a reply brief (including a
Motion to Dismiss) on October 5, 1994, and such Motion to Dismiss
was granted on the grounds of forum non conviens. Plaintiff filed
a complaint in New York on March 22, 1995. The Company filed its
answer, affirmative defenses and counterclaim on April 20, 1995.
Plaintiff filed a motion for class certification on September 8,
1995 to which the Company filed its opposition to the motion on
November 6, 1995.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described actions at this time.
However, LIVE and the other defendants believe that all these
lawsuits are without merit and intend to defend them vigorously.
Accordingly, no provision for any liability which may result has
been made in LIVE's consolidated financial statements. In the
opinion of management, these actions, when finally concluded and
determined, will not have a material adverse effect upon LIVE's
financial position or results of operations.
Other than as described above, there are no material legal
proceedings to which LIVE or any of its subsidiaries are a party
other than ordinary routine litigation in the ordinary course of
business. In the opinion of management (which is based in part on
the advice of outside counsel), resolution of these matters will
not have a material adverse impact on LIVE's financial position or
results of operations.
<PAGE>
<TABLE>Note 17 - Quarterly Financial Information (Unaudited)
Certain quarterly financial information is presented below:
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
1994
Net sales (1). . . . . . . . . . . . . . $ 18,265 $ 29,151 $ 33,845 $ 35,944 $117,205
Gross profit . . . . . . . . . . . . . . 3,856 5,433 387 7,171 16,847
Operating (loss) profit. . . . . . . . . (1,630) 151 (5,264) 569 (6,174)
(Loss) income from continuing operations before
income taxes. . . . . . . . . . . . . . (2,838) (1,069) (6,626) 1,059 (9,474)
(Loss) income from continuing operations (2,838 (1,369) (6,626) 1,159 (9,674)
Discontinued operations. . . . . . . . . -- -- -- (100) (100)
Net (loss) income. . . . . . . . . . . . (2,838) (1,369) (6,626) 1,059 (9,774)
Accretion in redemption value of
Series B Preferred Stock. . . . . . . . 600 1,800 1,800 1,800 6,000
Preferred dividends. . . . . . . . . . . 937 937 942 975 3,791
Net loss attributable to Common Stock (4,375) (4,106) (9,368) (1,716) (19,565)
Net loss per common share:
Continued Operations. . . . . . . . . . (1.81) (1.70) (3.87) (0.67) (8.05)
Discontinued Operations . . . . . . . . -- -- -- (0.04) (0.04)
Net loss . . . . . . . . . . . . . . . . (1.81) (1.70) (3.87) (0.71) (8.09)
1995
Net sales (2). . . . . . . . . . . . . . $ 44,505 $ 22,456 $ 40,060 $ 33,091 $140,112
Gross profit . . . . . . . . . . . . . . 9,949 5,077 3,246 8,815 27,087
Operating profit . . . . . . . . . . . . 5,359 936 1,400 3,131 10,826
Income before income taxes . . . . . . . 5,404 1,159 1,595 3,233 11,391
Net income . . . . . . . . . . . . . . . 4,904 1,059 1,595 3,233 10,791
Accretion in redemption value of
Series B Preferred Stock. . . . . . . . 1,571 1,259 1,259 420 4,509
Preferred dividends. . . . . . . . . . . 859 716 696 756 3,027
Net income (loss) attributable to Common Stock 2,474 (916) (360) 2,057 3,255
Net income (loss) per common share:
Primary . . . . . . . . . . . . . . . . 1.02 (0.38) (0.15) 0.84 1.34
Fully Diluted . . . . . . . . . . . . . 0.29 (0.38) (0.15) 0.21 0.53
<FN>
(1) Excludes net sales of VCL for each of the fiscal quarters of 1994 of
$5,341, $5,541, $3,828 and $8,002, respectively.
(2) Excludes net sales of VCL for each of the fiscal quarters of 1995 of
$9,779, $8,446, $5,261 and $8,771, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993 Deducted from
Asset Accounts:
Allowance for future sales returns. . $18,064 $18,308 (a) -- $18,566 (b) $17,806
Allowance for doubtful accounts . . . 1,770 413 -- 742 (c) 1,441
Allowance for advertising . . . . . . 4,629 11,215 -- 9,651 (d) 6,193
Allowance for overstock inventory . . 7,244 2,490 -- 5,233 (e) 4,501
Allowance for film rights in excess of net
realizable value. . . . . . . . . . 5,536 -- -- 4,213 (f) 1,323
Year ended December 31, 1994 Deducted from
Asset Accounts:
Allowance for future sales returns. . $17,806 $11,554 (a) -- $18,513 (b) $10,847
Allowance for doubtful accounts . . . 1,441 75 256 30 (c) 1,742
Allowance for advertising . . . . . . 6,193 10,633 -- 9,945 (d) 6,881
Allowance for overstock inventory . . 4,501 469 -- 2,282 (e) 2,688
Allowance for film rights in excess of net
realizable value. . . . . . . . . . 1,323 -- -- -- 1,323
Year ended December 31, 1995 Deducted from
Asset Accounts:
Allowance for future sales returns. . $10,847 $17,926 (a) -- $14,322 (b) $14,451
Allowance for doubtful accounts . . . 1,742 103 12 850 (c) 1,007
Allowance for advertising . . . . . . 6,881 7,499 (2,000) 8,961 (d) 3,419
Allowance for overstock inventory . . 2,688 637 -- 884 (e) 2,441
Allowance for film rights in excess of net
realizable value. . . . . . . . . . 1,323 -- 1,368 294 2,397
<FN>
(a) Amounts represent the gross profit impact of anticipated
sales returns.
(b) Returns credited to customer accounts during the year and
includes $649 (1993) re-classified VCL "Assets Held For
Sale."
(c) Net amount of accounts written-off and recoveries during
the year. Also, includes $679 (1993) re-classified VCL
"Assets Held For Sale."
(d) Reimbursements for co-op advertising.
(e) Disposal of overstock inventory and includes $103 (1993)
re-classified VCL "Assets Held For Sale."
(f) Write-off of film rights and includes $513 (1993) re-classified
VCL "Assets Held For Sale."
</FN>
</TABLE>
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(June 30, 1996 Unaudited)
(Amounts in Thousands)
June 30, December 31,
1996 1995
ASSETS
Cash and cash equivalents, including restricted
cash of $1,635 and $1,352 . . . . . . . . . . . . . . $15,669 $ 49,487
Accounts receivable, less allowances of $13,852
in 1996 . . . . . . . . . . . . . . . . . . . . . . . 9,350 --
Inventories. . . . . . . . . . . . . . . . . . . . . . 5,890 4,813
Property and equipment, net. . . . . . . . . . . . . . 927 1,145
Film costs, net of accumulated amortization
of $535,199 and $519,604. . . . . . . . . . . . . . . 79,636 66,700
Other assets . . . . . . . . . . . . . . . . . . . . . 1,787 1,353
Goodwill, net of accumulated amortization of
$42,004 and $40,042 . . . . . . . . . . . . . . . . . 23,985 25,947
$137,244 $ 149,445
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . $6,137 $ 6,675
Accrual for returns and advertising net of accounts
receivable of $15,447 in 1995 . . . . . . . . . . . . -- 3,430
Accrued expenses . . . . . . . . . . . . . . . . . . . 14,164 12,451
Notes payable. . . . . . . . . . . . . . . . . . . . . 6,666 8,333
Increasing Rate Senior Subordinated Notes due
1999, including capitalized interest of
$11,340 and $13,184 . . . . . . . . . . . . . . . . . 51,340 53,184
Film obligations . . . . . . . . . . . . . . . . . . . 11,393 18,559
Dividends payable. . . . . . . . . . . . . . . . . . . 3,570 2,309
Income taxes payable and deferred income taxes . . . . 7,146 6,484
Total liabilities . . . . . . . . . . . . . . . . . . 100,416 111,425
Stockholders' Equity:
Series B Cumulative Convertible Preferred Stock--
authorized 9,000,000 shares; $1.00 par value;
$38,198,000 and $41,970,000
liquidation preference; 3,819,000
and 4,197,000 shares outstanding. . . . . . . . . . . 3,819 4,197
Series C Convertible Preferred Stock--15,000 shares
authorized and outstanding; $1.00 par value;
$17,637,000 liquidation preference. . . . . . . . . . 15 15
Common Stock--authorized 24,000,000 shares;
$0.01 par value; 2,448,267 and 2,418,424
shares outstanding. . . . . . . . . . . . . . . . . . 24 24
Additional paid-in capital . . . . . . . . . . . . . . 126,144 129,668
Retained deficit . . . . . . . . . . . . . . . . . . . (93,174) (95,884)
36,828 38,020
$137,244 $149,445
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Net Sales. . . . . . . . . . . . . . . . . . . $50,269 $22,456 $72,822 $66,961
Cost of goods sold . . . . . . . . . . . . . . 42,975 17,379 59,688 51,935
GROSS PROFIT. . . . . . . . . . . . . . . . 7,294 5,077 13,134 15,026
Operating Expenses:
Selling, general and administrative expenses. 4,196 3,160 8,058 6,767
Amortization of goodwill. . . . . . . . . . . 981 981 1,962 1,962
5,177 4,141 10,020 8,729
2,117 936 3,114 6,297
Disposal of VCL/Carolco Communications GmbH:
Net Sales . . . . . . . . . . . . . . . . . . -- 8,446 -- 18,225
Costs and Expenses. . . . . . . . . . . . . . -- 8,446 -- 18,225
-- -- -- --
OPERATING PROFIT. . . . . . . . . . . . . . 2,117 936 3,114 6,297
Interest and other income . . . . . . . . . . 523 616 1,312 1,092
Interest expense. . . . . . . . . . . . . . . (315) (393) (812) (826)
INCOME BEFORE INCOME TAXES. . . . . . . . . 2,325 1,159 3,614 6,563
Income tax expense. . . . . . . . . . . . . . 582 100 904 600
NET INCOME. . . . . . . . . . . . . . . . . $ 1,743 $ 1,059 $ 2,710 $ 5,963
Net income (loss) per common share:
Primary . . . . . . . . . . . . . . . . . . $ 0.30 $ (0.38)$ 0.39 $ 0.64
Fully diluted . . . . . . . . . . . . . . . $ 0.17 $ (0.38)$ 0.25 $ 0.41
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . 2,543 2,442 2,612 2,432
Fully diluted . . . . . . . . . . . . . . . 10,529 2,442 10,753 14,522
See notes to condensed consolidated financial statements.
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
Six Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 2,710 $ 5,963
Adjustments to reconcile net income to
net cash (used for) provided by operating activities:
Depreciation and amortization of property
and equipment. . . . . . . . . . . . . . . . . . . . 334 353
Amortization of goodwill. . . . . . . . . . . . . . . 1,962 1,962
Amortization of and adjustments to film costs . . . . 24,563 29,904
Income taxes payable and deferred income taxes. . . . 662 (92)
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . (9,350) 1,950
Inventories . . . . . . . . . . . . . . . . . . . . (1,077) 631
Assets held for sale. . . . . . . . . . . . . . . . -- 3,177
Other assets. . . . . . . . . . . . . . . . . . . . (434) (32)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses . . . . . . . 1,175 3,014
Accrual for returns and advertising . . . . . . . . (3,430) 8,945
Liabilities related to assets held for sale . . . . -- (177)
Film cost additions . . . . . . . . . . . . . . . . (37,499) (19,000)
Payments on film obligations. . . . . . . . . . . . (7,166) (6,823)
Cash (used for) provided by operating
activities. . . . . . . . . . . . . . . . . . . . (27,550) 29,775
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . (116) (334)
Cash (used for) investing activities. . . . . . . (116) (334)
FINANCING ACTIVITIES:
Issuance of long-term obligations . . . . . . . . . . -- 10,000
Payments on long-term obligations . . . . . . . . . . (3,511) (5,177)
Repurchase of Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (2,332) (5,460)
Dividends paid on Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (477) (1,800)
Issuance of Common Stock. . . . . . . . . . . . . . . 168 --
Cash (used for) financing activities. . . . . . . (6,152) (2,437)
(Decrease)increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . (33,818) 27,004
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . . . . . 49,487 24,264
Cash and cash equivalents at end of period. . . . $ 15,669 $ 51,268
See notes to condensed consolidated financial statements.
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
Note 1 - Summary of Significant Accounting Policies
Background and Operations: LIVE Entertainment Inc. ("LIVE" or
the "Company") was formed in 1988 and its largest ongoing
businesses are LIVE Film & Mediaworks ("LFM") (formerly LIVE Home
Video Inc.) and LIVE International ("LI"), which primarily acquire
rights to produce and distribute theatrical motion pictures,
children's films and special interest programs (including CD-ROM)
which they market and distribute in all media to wholesalers,
retailers and consumers in the United States and Canada (LFM) and
internationally (LI). As part of its international activities, the
Company also owned an 81% interest in VCL/Carolco Communications
GmbH ("VCL"), a home video distribution and marketing company
headquartered in Munich, Germany. VCL's year-end is November 30.
In November 1995, LIVE completed a sales transaction providing for
the disposal of its interest in VCL. The Company's continuing
operations are principally in a single business segment, the
production, distribution and retail sale of a broad variety of film
related entertainment software products.
Basis of Presentation: The accompanying consolidated financial
statements and footnotes are unaudited and are condensed, as
contemplated by the Securities and Exchange Commission under Rule
10-01 of Regulation S-X. Accordingly, they do not contain all
disclosures required by generally accepted accounting principles,
but in the opinion of management of LIVE include all adjustments
(consisting only of normal recurring accruals) necessary to fairly
state the financial position and results of operations of LIVE.
The financial statements include the accounts of LIVE and its
subsidiaries - LFM, LI and VCL (1995) and have been restated to
account for VCL as a disposal of a portion of a line of business.
All significant intercompany balances and transactions have been
eliminated.
LIVE suggests that these condensed consolidated financial
statements be read in conjunction with its consolidated financial
statements for the year ended December 31, 1995 and related notes
thereto included on Form 10-K filed with the Securities and
Exchange Commission.
Certain reclassifications of 1995 amounts have been made in
order to conform with the 1996 financial statement presentation.
<PAGE>
Net Income Per Common Share:
Primary:
Per share information has been determined on the basis of
2,542,737 and 2,611,937 weighted average number of shares
outstanding for the three and six months ended June 30, 1996 and
2,442,280 and 2,431,750 weighted average number of shares
outstanding for the three and six months ended June 30, 1995,
respectively. The net income per common share for the three and
six months ended June 30, 1996 and 1995 gives effect to dividends
of $984,000 and $1,683,000, and $716,000 and $1,575,000,
respectively, on both the Series B Cumulative Convertible Preferred
Stock ("Series B Preferred Stock") and the Series C Convertible
Preferred Stock ("Series C Preferred Stock"). The net income for
the three and six months ended June 30, 1995 gives effect to the
accretion of the redemption value of the Series B Preferred Stock
of $1,259,000 and $2,830,000, respectively.
Fully Diluted:
Per share information has been determined on the basis of
10,529,208 and 10,753,552, for the three and six months ended June
30, 1996, respectively, assuming conversion of the Series B
Preferred Stock and the Series C Preferred Stock. Per share
information for the six months ended June 30, 1995 has been
determined on the basis of 14,521,936 weighted average number of
shares outstanding. Such conversion was not assumed for the three
months ended June 30, 1995, because the effect thereof would have
been antidilutive.
Note 2 - Series B Preferred Stock
The Series B Preferred Stock has a liquidation value of $10.00
per share. Holders of the Series B Preferred Stock are entitled to
an annual dividend, payable quarterly, of 10% ($1.00 per share) if
paid in cash and 12% if paid in kind. Dividends of $796,000 ($0.21
per share) were accrued on the Series B Preferred Stock for the
quarter ending June 30, 1996. The Company may redeem the Series B
Preferred Stock at any time at 100% of the liquidation value.
Although LIVE has no obligation to redeem any Series B Preferred
Stock, subject to the availability of funds and the prior approval
of its Board of Directors and its lenders, LIVE may acquire shares
of its Series B Preferred Stock from time to time, either through
private purchases or through open market purchases. In March 1996
the Company purchased 377,500 shares of the Series B Preferred
Stock at an average price of approximately $6.00 per share.
<PAGE>
Note 3 - Commitments
The Company has certain existing and potential commitments for
film acquisitions, theatrical prints, advertising and release costs
which will require the use of a substantial portion of the existing
cash balances over the next two fiscal quarters of 1996.
Note 4 - Litigation
LIVE had been the defendant in two purported class action law
suits that were filed in 1992. The Company had requested the U.S.
District Court to dismiss both cases for non-prosecution due to the
fact that the plaintiffs had taken no action in either of these
cases for over one year. On April 8, 1996, the U.S. District Court
granted LIVE's request and dismissed both cases.
In May 1994, a breach of contract claim was filed against a
subsidiary of the Company, claiming nonpayment of royalties from
licensing of films in foreign territories and deprivation of
royalty payments as a result of misallocation of certain values
asserted with licensed film properties. Films subject to the
complaint were contained in the assets of Vestron, Inc. purchased
by the Company in July 1991, and the period covered included the
license periods both prior to, and subsequent to, the acquisition
date by the Company. The Company filed a reply brief (including a
Motion to Dismiss) on October 5, 1994, and such Motion to Dismiss
was granted on the grounds of forum non conviens. Plaintiff filed
a complaint in New York on March 22, 1995. The Company filed its
answer, affirmative defenses and counterclaim on April 20, 1995.
Plaintiff filed a motion for class certification on September 8,
1995 to which the Company filed its opposition to the motion on
November 6, 1995. After limited pre-trial discovery, a motion for
class certification was argued on December 6, 1995. By order dated
June 21, 1996 and filed on June 25, 1996, the Court in this action
determined that the action should be maintained as a class action
under the provisions of Section 901(a) of the New York Civil
Practice Law and Rules.
The Company filed an appeal from the Order granting class
certification on July 19, 1996 and filed a Motion for
Decertification of the class on July 24, 1996. A hearing on the
motion has been scheduled for August 21, 1996.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described action at this time.
However, LIVE and the other defendants believe that this lawsuit is
without merit and intends to defend it vigorously. Accordingly, no
provision for any liability which may result has been made in
LIVE's consolidated financial statements. In the opinion of
management, this action, when finally concluded and determined,
will not have a material adverse effect upon LIVE's financial
position or results of operations.
Other than as described above, there are no material legal
proceedings to which LIVE or any of its subsidiaries are a party
other than ordinary routine litigation in the ordinary course of
business. In the opinion of management (which is based in part on
the advice of outside counsel), resolution of these matters will
not have a material adverse impact on LIVE's financial position or
results of operations.
ANNEX A
<PAGE>
[To Come]
<PAGE>
ANNEX B
<PAGE>
[To Come]
<PAGE>
ANNEX C
<PAGE>
LETTER OF TRANSMITTAL/CONSENT FORM
to tender for exchange and give consents in respect of
Series B Cumulative Convertible Preferred Stock,
par value $1.00, of
LIVE ENTERTAINMENT INC.
Pursuant to the Prospectus, Consent
Solicitation and Proxy Statement
Dated [______], 1996
THE WITHDRAWAL DEADLINE FOR THE EXCHANGE OFFER IS 5:00 P.M.,
NEW YORK CITY TIME, ON [_____], 1996. THE EXCHANGE OFFER WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON [_____], 1996,
UNLESS EXTENDED. THE COMPANY CURRENTLY DOES NOT INTEND TO EXTEND
THE EXPIRATION DATE OF THE EXCHANGE OFFER.
The Exchange Agent:
American Stock Transfer & Trust Company
By Mail, Hand or Overnight Courier: By Facsimile:
(718) 234-5001
40 Wall Street
New York, NY 10005 Telephone:
Attention: Exchange Dept. (800) 937-5449
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS LETTER OF
TRANSMITTAL VIA FACSIMILE OR TELEX NUMBER OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
The Instructions accompanying this Letter of Transmittal
should be read carefully before this Letter of Transmittal is
completed.
This Letter of Transmittal is to be used if (i) either
Series B Cumulative Convertible Preferred Stock, par value $1.00
("Outstanding Preferred Stock") of LIVE Entertainment Inc., a
Delaware corporation (the "Company"), is enclosed herewith, (ii)
Outstanding Preferred Stock is tendered in accordance with the
guaranteed delivery procedures set forth in the Prospectus, Consent
Solicitation and Proxy Statement dated [______], 1996 (the
"Prospectus") under "The Exchange Offer Guaranteed Delivery
Procedures," and/or (iii) consents to the Proposed Amendments (as
defined below) are to be given.
The undersigned acknowledges receipt of the Prospectus and
this Letter of Transmittal, which together constitute the offer
(the "Exchange Offer") by the Company to exchange for each share of
Outstanding Preferred Stock, the Common Stock Consideration OR the
Cash and Common Stock Consideration as determined in the
Prospectus. Tendering holders must indicate below their election
of either the Common Stock Consideration or the Cash and Common
Stock Consideration (see "Holders Sign Here"). IF NO ELECTION IS
INDICATED ON THE SIGNATURE FORM, THE TENDERING HOLDER WILL BE
DEEMED TO HAVE ELECTED THE COMMON STOCK CONSIDERATION.
Tendering holders of Outstanding Preferred Stock must consent
to the amendments (the "Proposed Amendments") to the Certificate of
Designations, Preferences and Relative, Participating, Optional or
Other Special Rights of the Outstanding Preferred Stock pursuant to
which the Outstanding Preferred Stock was issued. Only record
holders of Outstanding Preferred Stock on [______], 1996 ("Record
Holders") are entitled to grant the necessary consent to the
Proposed Amendments with respect to such Outstanding Preferred
Stock. An exchanging holder who is not a Record Holder should (i)
obtain a properly completed Letter of Transmittal from the Record
Holder with signatures guaranteed by an Eligible Institution (as
defined below), or (ii) obtain and include with this Letter of
Transmittal Outstanding Preferred Stock properly endorsed for
transfer by the Record Holder or accompanied by a properly
completed stock power from the Record Holder, together with a
properly completed form of consent from such Record Holder with
respect to the Proposed Amendments, with signatures on the
endorsement (or stock power) and on the consent guaranteed by an
Eligible Institution or (iii) effect a record transfer of such
Outstanding Preferred Stock and comply with the requirements
applicable to Record Holders for tendering Outstanding Preferred
Stock prior to the Expiration Date. The valid execution and
delivery of this Letter of Transmittal will constitute consent to
the Proposed Amendments and authorization for the Company to
present consents received to the appropriate persons.
The Exchange Offer is not being made to, and tenders will not
be accepted from or on behalf of, holders of Outstanding Preferred
Stock in any jurisdiction in which the making or acceptance of such
Exchange Offer would not be in compliance with the laws of such
jurisdiction.
The undersigned has completed, signed and delivered this
Letter of Transmittal and checked the appropriate box(es) below to
indicate the action the undersigned desires to take with respect to
the Exchange Offer.
Holders of Outstanding Preferred Stock who wish to consent to
the Proposed Amendments, or to tender their Outstanding Preferred
Stock must, at a minimum, complete columns (1) through (3) in the
table below and sign in the appropriate box below. If only those
columns are completed, such holder will have consented to the
Proposed Amendments with respect to, and will have tendered, all
Outstanding Preferred Stock listed in column (2). If the holder of
Outstanding Preferred Stock wishes to tender less than all of such
Outstanding Preferred Stock, column (4) must be completed in full,
and if the holder of Outstanding Preferred Stock wishes to consent
with respect to Outstanding Preferred Stock which such holder does
not wish to tender, columns (4) and (5) must be completed in full.
In either such case, such holder should refer to Instruction 5.
Pursuant to the terms of the Exchange Offer, it is not possible to
tender Outstanding Preferred Stock without providing a valid
consent to the Proposed Amendments by the Record Holder with
respect to all such Outstanding Preferred Stock tendered.
DESCRIPTION OF OUTSTANDING PREFERRED STOCK
(1)
Name(s) and Address(es) of
Record Holder(s)
(Please fill in, if blank)
(2)
Certificate
Number(s)
(Attach
signed
list if
necessary)
(3)
Aggregate
Principal
Amount/Number
of Shares
(4)
Principal
Amount/Shares
Tendered(a)
(5)
Principal
Amount/Shares
Not Tendered
as to Which
Consents are
Given(b)
(a) Need not be completed by holders who wish to tender the principal
amount/number of shares of Outstanding Preferred Stock listed in column
(3). Completion of column (4) will indicate that the holder wishes to
tender only the principal amount/number of shares of Outstanding
Preferred Stock indicated in column (4) and, unless column (5) is
completed, consent to the Proposed Amendments only with respect to the
principal amount/number of shares of Outstanding Preferred Stock
indicated in column (4).
(b) Need be completed only by holders who wish to consent to the
Proposed Amendments with respect to a principal amount/number of
shares of Outstanding Preferred Stock greater than that being
tendered pursuant hereto.
Holders of Outstanding Preferred Stock may elect to tender
their Outstanding Preferred Stock in whole or in part. See
Instruction 5.
Holders of the Outstanding Preferred Stock who desire to
exchange their Outstanding Preferred Stock ("Exchanging Holders")
and who cannot deliver their Outstanding Preferred Stock and any
other documents required hereby to the Exchange Agent prior to the
expiration of the Exchange Offer, may tender their Outstanding
Preferred Stock according to the guaranteed delivery procedures set
forth in the Prospectus under "The Exchange Offer Guaranteed
Delivery Procedures." See Instruction 2.
(THE BOXES BELOW ARE FOR USE BY ELIGIBLE INSTITUTIONS
ONLY)
[ ] CHECK HERE IF TENDERED OUTSTANDING PREFERRED STOCK IS BEING
DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Record Holder(s): ____________________________________________
Window Ticket Number (if any): _______________________________________
Date of Execution of Notice of Guaranteed Delivery:___________________
Name of Eligible Institution which Guaranteed Delivery: ______________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby (i) tenders to the Company the number
of shares of Outstanding Preferred Stock indicated above, in
accordance with and upon the terms and subject to the conditions
set forth in the Exchange Offer, to exchange each share of
Outstanding Preferred Stock for the Common Stock Consideration OR
the Cash and Common Stock Consideration and (ii) consents to the
Proposed Amendments in respect of the Outstanding Preferred Stock
indicated above.
Subject to, and effective upon, the acceptance for exchange
and exchange of the Outstanding Preferred Stock tendered herewith
in accordance with the terms of the Exchange Offer, the undersigned
hereby (i) sells, assigns and transfers to, or upon the order of,
the Company all right, title and interest in and to all such
Outstanding Preferred Stock as are being tendered hereby and that
are being accepted for exchange pursuant to the Exchange Offer and
(ii) consents to the proposed amendments in respect of the
Outstanding Preferred Stock indicated above. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent as
the true and lawful agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as the agent
of the Company), with respect to the Outstanding Preferred Stock
tendered hereby and accepted for exchange pursuant to the Exchange
Offer, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest)
to deliver the Outstanding Preferred Stock tendered hereby to the
Company or cause ownership of such Outstanding Preferred Stock to
be transferred to the Company on the Company's books and deliver
all accompanying evidences of transfer and authenticity to or upon
the order of the Company upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Securities and payment to
which the undersigned is entitled upon the acceptance for exchange
by the Company of such Outstanding Preferred Stock pursuant to the
Exchange Offer and to receive all benefits and otherwise exercise
all rights of beneficial ownership of such Outstanding Preferred
Stock, all in accordance with the terms and subject to the
conditions of the Exchange Offer.
The name and address of the registered holder(s) should be
printed above under "Description of Outstanding Preferred Stock,"
if not already printed thereunder, exactly as they appear on the
Outstanding Preferred Stock tendered hereby. The certificate
number(s) and the principal amount of Outstanding Preferred Stock
to which this Letter of Transmittal relates, together with the
principal amount or number of shares of Outstanding Preferred Stock
that the undersigned wishes to tender, should be indicated in the
appropriate boxes above under "Description of Outstanding Preferred
Stock."
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, sell, assign
and transfer any Outstanding Preferred Stock tendered hereby, that
the undersigned either has full power and authority to consent to
the Proposed Amendments or is delivering a duly executed consent
and that when the Outstanding Preferred Stock is accepted for
exchange by the Company, that the Company will acquire good,
indefeasible and unencumbered title thereto, free and clear of all
liens, restrictions, claims and encumbrances and not subject to any
adverse claim. The undersigned, upon request, will execute and
deliver any additional documents deemed by the Exchange Agent or
the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Outstanding Preferred Stock tendered
hereby and the valid giving of consents to the Proposed Amendments
with respect thereto.
All authority conferred or agreed to be conferred in this
Letter of Transmittal shall not be affected by, and shall survive,
the death or incapacity of the undersigned and any obligation of
the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and
assigns of the undersigned. Any tender of Outstanding Preferred
Stock hereunder may be withdrawn only in accordance with the
procedures set forth in the Instructions contained in this Letter
of Transmittal, but such withdrawal of Outstanding Preferred Stock
will not effect a revocation of a consent with respect to such
Outstanding Preferred Stock. See Instruction 4.
For the Proposed Amendments to become effective with respect
to the Outstanding Preferred Stock, Record Holders of not less than
a majority of the aggregate number of shares of Outstanding
Preferred Stock must consent thereto and such valid and unrevoked
consents must have been delivered to the Exchange Agent. Subject
to the conditions to the consummation of the Exchange Offer set
forth in the Prospectus, including the Company being satisfied that
it has received the requisite consents to the Proposed Amendments,
the Company will deliver such consents to the appropriate persons,
as promptly as possible after the receipt thereof, and the Proposed
Amendments will be effective immediately upon such delivery.
However, the Proposed Amendments will not become operative prior to
the acceptance for exchange of more than 50% of the aggregate
number of shares of Outstanding Preferred Stock. If the Company
does not accept tenders of Outstanding Preferred Stock pursuant to
the Exchange Offer, consents given by Record Holders of such
Outstanding Preferred Stock relating to such tendered Outstanding
Preferred Stock will not be counted for purposes of determining
whether the requisite consents have been obtained.
Any Record Holder of Outstanding Preferred Stock who has
delivered a consent to the Proposed Amendments may effectively
revoke such consent by filing written notice with the Company at
any time prior to (but not after) the date and time of delivery of
Requisite Acceptances effecting the Proposed Amendments with
respect to the Outstanding Preferred Stock. Any holder who
succeeds a Record Holder of Outstanding Preferred Stock may revoke
a previously delivered consent of the previous Record Holder only
if such subsequent holder has a valid proxy from such previous
holder.
However, if a Record Holder effects a valid revocation of
consent to the Proposed Amendments with respect to tendered
Outstanding Preferred Stock, such action will render the prior
tender of such Outstanding Preferred Stock defective, and the
Company will have the right, which it may waive, to reject such
tender as invalid and ineffective. Prior to the delivery of
consents, the Company intends to consult with the Exchange Agent to
determine whether the Exchange Agent has received any revocations
of consents previously obtained, whether such revocations are valid
and whether the Company shall have received the Requisite
Acceptances to effect the Proposed Amendments to the Outstanding
Preferred Stock. The Company reserves the right to contest the
validity of any such revocations. A purported notice of revocation
which is not received by the Exchange Agent in a timely fashion
will not be effective to revoke a consent previously given.
The undersigned understands that the tender of Outstanding
Preferred Stock pursuant to one of the procedures described in the
Prospectus under "The Exchange Offer Procedure for Tendering
Outstanding Preferred Stock and Giving Consents" and the
Instructions hereto will constitute the tendering holder's
acceptance of the terms and the conditions of the Exchange Offer,
as well as the tendering holder's representation and warranty that
(i) such holder owns the Outstanding Preferred Stock being tendered
within the meaning of Rule 10b-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) the tender of such
Outstanding Preferred Stock complies with Rule 10b-4. The
Company's acceptance for exchange of Outstanding Preferred Stock
tendered pursuant to the Exchange Offer will constitute a binding
agreement between the tendering holder and the Company upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated herein under "Special Issuance
Instructions," please issue the Exchange Securities and payment, if
any, with respect to Outstanding Preferred Stock accepted for
exchange, and/or any principal amount or shares of Outstanding
Preferred Stock not tendered or not accepted for exchange, in the
name of the registered holder(s) appearing above under "Description
of Outstanding Preferred Stock." In addition, unless otherwise
indicated under "Special Delivery Instructions," please mail the
Exchange Securities with respect to Outstanding Preferred Stock
accepted for exchange, and/or any Outstanding Preferred Stock for
any principal amount or shares not tendered or not accepted for
exchange (and accompanying documents, as appropriate), to the
registered holder(s) at the address(es) appearing above under
"Description of Outstanding Preferred Stock." If both the "Special
Issuance Instructions" and "Special Delivery Instructions" are
completed, please mail the Exchange Securities and any payment, if
applicable, with respect to Outstanding Preferred Stock accepted
for exchange, and/or any Outstanding Preferred Stock for any
principal amount not tendered or accepted for exchange, in the name
of, and send Exchange Securities and payment and/or Outstanding
Preferred Stock to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" to transfer any Outstanding
Preferred Stock from the name(s) of the registered holder(s)
thereof if the Company does not accept for exchange any of the
Outstanding Preferred Stock so tendered.
SPECIAL ISSUANCE INSTRUCTIONS
(See Instruction 6 and 7)
To be completed ONLY if the Common Stock with
respect to Outstanding Preferred Stock accepted for exchange are
to be issued, or certificates for Outstanding Preferred Stock for
principal amounts or shares not tendered or not accepted for
exchange are to be reissued, in the name of someone other than
the undersigned.
Issue:
________ Common Stock ________ Outstanding Preferred Stock
to:
Name ______________________________________
(Please Type or Print)
Address
____________________________________________
____________________________________________
____________________________________________
(Zip Code)
____________________________________________
(Tax Identification or Social Security No.)
SPECIAL ISSUANCE INSTRUCTIONS
(See Instruction 7)
To be completed ONLY if the Common Stock and
payment with respect to Outstanding Preferred Stock accepted for
exchange, or any certificates for Outstanding Preferred Stock for
principal amounts or shares not tendered or not accepted for
exchange, are to be sent to someone other than the undersigned
at an address other than that appearing above under "Description
of Outstanding Preferred Stock."
Issue:
________ Common Stock ________ Outstanding Preferred Stock
to:
Name ______________________________________
(Please Type or Print)
Address
____________________________________________
____________________________________________
____________________________________________
(Zip Code)
____________________________________________
(Tax Identification or Social Security No.)
HOLDER SIGN HERE
(Please complete Subsitute Form W-9 on the bottom hereof.)
The undersigned Holder(s) elect(s) (please mark only one box):
[ ] The Common Stock Consideration
[ ] The Cash and Common Stock Consideration
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
Signature(s) of Holder(s)
Dated____________________________________________________
(Must be signed by Record Holder(s) exactly as name(s) appear(s) on
Outstanding Preferred Stock or on a security position listing or by the
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by an officer of a
corporation, attorney-in-fact, executor, administrator, trustee, guardian
or other person(s) acting in a fiduciary or representative capacity,
please set forth full title and see Instruction 6.)
Name(s)__________________________________________________
_________________________________________________________
_________________________________________________________
(Please Type or Print)
Capacity (full title)____________________________________
Address__________________________________________________
_________________________________________________________
_________________________________________________________
(Zip Code)
Area Code and Telephone No_______________________________
Tax Identification or Social Security No_________________
_________________________________________________________
_________________________________________________________
Guarantee of Signature(s)
(If Required-See Instructions 1 and 6)
Authorized Signature_____________________________________
Name_____________________________________________________
_________________________________________________________
(Please Type or Print)
Name of Firm_____________________________________________
Address__________________________________________________
_________________________________________________________
_________________________________________________________
(Zip Code)
Area Code and Telephone No_______________________________
Dated____________________________________________________
CONSENT OF RECORD HOLDER
In the event that the holder signing above is not the Record Holder,
the Record Holder(s) must consent to the Proposed Amendments.
Pursuant to the Exchange Offer and the Company's solicitation of
consents, the undersigned Record Holder(s) of the Outstanding
Preferred Stock indicated above hereby consent(s) to the Proposed
Amendments (as defined in the Prospectus) in respect of such
Outstanding Preferred Stock.
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
Signature(s) of Holder(s)
Dated____________________________________________________
(Must be signed by Record Holder(s) exactly as name(s) appear(s) on
Outstanding Preferred Stock or on a security position listing. If
signature is by an officer of a corporation, attorney-in-fact, executor,
administrator, trustee, guardian or other person(s) acting in a fiduciary
or representative capacity, please set forth full title and see
Instruction 6.)
Name(s)__________________________________________________
_________________________________________________________
_________________________________________________________
(Please Type or Print)
Capacity (full title)____________________________________
Address__________________________________________________
_________________________________________________________
_________________________________________________________
(Zip Code)
Area Code and Telephone No_______________________________
Tax Identification or Social Security No_________________
_________________________________________________________
_________________________________________________________
Guarantee of Signature(s)
(If Required-See Instructions 1 and 6)
Authorized Signature_____________________________________
Name_____________________________________________________
_________________________________________________________
(Please Type or Print)
Name of Firm_____________________________________________
Address__________________________________________________
_________________________________________________________
_________________________________________________________
(Zip Code)
Area Code and Telephone No_______________________________
Dated____________________________________________________
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Guarantee of Signatures. Signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office in the United States, a
credit union, or a savings association (each an "Eligible Institution")
unless (i) the Outstanding Preferred Stock tendered hereby are tendered by
the Record Holder(s) of the Outstanding Preferred Stock who has (have) not
completed either the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on this Letter of Transmittal or (ii) the Outstanding
Preferred Stock is tendered for the account of an Eligible Institution.
2. Delivery of this Letter of Transmittal and Outstanding Preferred
Stock. This Letter of Transmittal is be used if (i) Outstanding Preferred
Stock tendered hereby are enclosed herewith, (ii) Outstanding Preferred Stock
is tendered in accordance with the guaranteed delivery procedures set forth in
the Prospectus under "The Exchange Offer-Guaranteed Delivery Procedures" or
(iii) consents to the Proposed Amendments are to be given, either with or
without tendering Outstanding Preferred Stock. For a holder to validly tender
Outstanding Preferred Stock a properly completed and duly executed Letter of
Transmittal (or facsimile hereof) with any required signature guarantees and
all other required documents must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal on or prior to
the Expiration Date (as defined below) or the Exchanging Holder must comply
with the guaranteed delivery procedures set forth in the next paragraph.
"Expiration Date" means 12:00 Midnight, New York City Time, on [______], 1996
unless the Company, in its sole discretion, shall have extended the period
for which the Exchange Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Exchange Offer, as so
extended, shall expire. The Company expressly reserves the right, at any time
or from time to time, to extend the period for time during which the
Exchange Offer is open by giving oral or written notice of such extension of
the Exchange Agent and by making a public announcement of such extension.
Holders whose Outstanding Preferred Stock is not immediately available or
who cannot deliver Outstanding Preferred Stock and all other required documents
to the Exchange Agent prior to the Expiration Date may tender their
Outstanding Preferred Stock by properly completing, and duly executing, the
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures
set forth in the Prospectus under "The Exchange Offer-Guaranteed Delivery
Procedures." Pursuant to such procedures, (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Company, must be received by the Exchange Agent prior to the Expiration Date
and (iii) all tendered Outstanding Preferred Stock, together with this Letter
of Transmittal (or facsimile hereof), properly completed and duly executed,
with any required signature guarantees and all other required documents, must
be received by the Exchange Agent within five trading days of The New York
Stock Exchange, Inc. after the Expiration Date, all as provided in the
Prospectus under "The Exchange Offer-Procedure for Tending Outstanding
Preferred Stock and Giving Consents."
Holders of the Outstanding Preferred Stock who are not Record Holders
should (i) obtain a properly completed Letter of Transmittal from the Record
Holder with signatures guaranteed by an Eligible Institution, or (ii) obtain
and include with this Letter of Transmittal Outstanding Preferred Stock
properly endorsed for transfer by the Record Holder or accompanied by a
properly completed stock power from the Record Holder, together with a
properly completed form of consent from such Record Holder with respect to the
Proposed Amendments, with signatures on the endorsement or stock power and on
the consent guaranteed by an Eligible Institution or (iii) effect a record
transfer of such Outstanding Preferred Stock and comply with the requirements
applicable to Record Holders for tendering Outstanding Preferred Stock prior
to the Expiration Date. Any Outstanding Preferred Stock properly tendered
prior to the Expiration Date accompanied by a properly completed Letter of
Transmittal will be transferred of record either prior to or as of the
Expiration Date at the discretion of the Company. The Company has no
obligation to transfer any Outstanding Preferred Stock from the name of the
Record Holder thereof if the Company does not accept for exchange any of such
Outstanding Preferred Stock.
Unless the Outstanding Preferred Stock tendered is deposited with the
Exchange Agent prior to the Expiration Date (accompanied by a properly
completed Letter of Transmittal and any other documents required by
this Letter of Transmittal) or tendered pursuant to the guaranteed delivery
procedures set forth above, the Company may, at its option, reject such
tender. Issuance of Common Stock and, if applicable, payment in exchange for
Outstanding Preferred Stock will be made only against deposit of the tendered
Outstanding Preferred Stock. If less than the entire number of shares of
Outstanding Preferred Stock evidenced by a submitted certificate is tendered,
the tendering holder of Outstanding Preferred Stock should fill in the
principal amount or number of shares tendered in the appropriate box above
with respect to the deposit being made, but only to the extent of the number
of shares of Outstanding Preferred Stock being tendered. The Exchange Agent
will then return to the tendering holder (unless otherwise requested by the
holder under "Special Delivery Instructions" above), as promptly as practicable
following the Expiration Date, shares of Outstanding Preferred Stock equal to
the portion of such delivered Outstanding Preferred Stock not tendered. The
entire number of shares of Outstanding Preferred Stock deposited with the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
The method of delivery of Outstanding Preferred Stock, this Letter of
Transmittal (or facsimile hereof) and any other required documents is at the
option and risk of the Exchanging Holder, but, except as otherwise provided
below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If sent by mail, registered mail with
return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to assure timely delivery.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Outstanding
Preferred Stock for exchange.
Only a Record Holder of Outstanding Preferred Stock may consent to the
Proposed Amendments. Any beneficial owner of Outstanding Preferred Stock who
is not the Record Holder must arrange with the Record Holder to execute and
deliver the consent on his or her behalf. The Record Holder may provide such
consent either by executing the "Consent of Record Holder" provided for
herein or by executing a separate consent substantially in the form of such
"Consent of Record Holder." In either case, the signature of the Record Holder
must be guaranteed by an Eligible Institution.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and the number of shares of the Outstanding Preferred Stock
to which this Letter of Transmittal relates should be listed on a
separate signed schedule attached hereto.
4. Withdrawal of Tender. Tenders of Outstanding Preferred
Stock is irrevocable, except that tendered Outstanding
Preferred Stock may be withdrawn (a) at any time prior to
12:00 Midnight, New York City time, on [______], [______],
1996 and (b) if applicable, for a period of five business
days following public announcement of a waiver of the
Requisite Acceptance Condition in respect of either Exchange
Offer. Tendered Outstanding Preferred Stock may also be
withdrawn at any time after forty business days after the
Commencement Date of the Exchange Offer. Holders of
Outstanding Preferred Stock who wish to exercise their right
of withdrawal must give notice of withdrawal in writing or by
telegram, telex or facsimile transmission, which notice must
be timely received by the Exchange Agent at one of its
addresses set forth on the back cover page of this
Prospectus. Any such notice of withdrawal must specify the
name of the person who tendered the Outstanding Preferred
Stock to be withdrawn and the number of shares of Outstanding
Preferred Stock to be withdrawn. If Outstanding Preferred
Stock have been delivered or otherwise identified to the
Exchange Agent, the name of the Record Holder and the serial
numbers of the particular Outstanding Preferred Stock to be
so withdrawn must also be furnished to the Exchange Agent
prior to the physical release of the withdrawn Outstanding
Preferred Stock. Such notice of withdrawal must be signed by
the Record Holder of the Outstanding Preferred Stock in the
same manner as the original signature on this Letter of
Transmittal (including any required signature guarantees) or
be accompanied by evidence satisfactory to the Company that
the person withdrawing the tender has succeeded to the
beneficial ownership of the Outstanding Preferred Stock.
Any permitted withdrawals of tenders of Outstanding
Preferred Stock may not be rescinded, and any Outstanding
Preferred Stock withdrawn will thereafter be deemed not
validly tendered for purposes of the Exchange Offer; however,
withdrawn Outstanding Preferred Stock may be re-tendered by
following one of the procedures described herein at any time
on or prior to the Expiration Date. Withdrawal of
Outstanding Preferred Stock will not effect revocation of a
consent. See "The Exchange Offer-Revocation of Consents;
Defective Tender" in the Prospectus.
All questions as to validity, form and eligibility
(including time of receipt) of the notice of withdrawal will
be determined by the Company in its sole discretion, which
determination will be final and binding. None of the
Company, the Exchange Agent, the Information Agent, or any
other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such
notification.
5. Partial Tenders. Holders may elect to tender their
Outstanding Preferred Stock in whole or in part in exchange
for Common Stock and, if applicable, payment in cash. If
less than all shares of Outstanding Preferred Stock evidenced
by a certificate is to be tendered, fill in the principal
amount that is to be tendered in part, in the box entitled
"Principal Amount/Shares Tendered" above. In such case, a
new certificate for the shares of Outstanding Preferred Stock
not so tendered will be sent to such holder, unless otherwise
provided in the appropriate box of this Letter of
Transmittal, as soon as practicable after the Expiration
Date. The number of shares of Outstanding Preferred Stock
represented by a certificate delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise
indicated.
6. Signatures on this Letter of Transmittal; Stock Powers
and Endorsements. If this Letter of Transmittal is signed by
the registered holder(s) of the Outstanding Preferred Stock
tendered hereby, the signature must correspond with the name
as written on the face of the Outstanding Preferred Stock
without alteration, enlargement or any change whatsoever.
If any of the Outstanding Preferred Stock tendered
hereby are owned of record by two or more joint owners, all
such owners must sign this Letter of Transmittal.
If any Outstanding Preferred Stock tendered hereby are
registered in different names, it will be necessary to
complete, sign and submit as many separate copies of this
Letter of Transmittal and any necessary accompanying
documents as there are different registrations.
When this Letter of Transmittal is signed by the
registered holder(s) of the Outstanding Preferred Stock
listed and tendered hereby, no endorsements or separate stock
powers are required unless the Common Stock with respect to
Outstanding Preferred Stock accepted for exchange are to be
issued, or Outstanding Preferred Stock for a number of shares
not exchanged or not tendered are to be reissued, to a person
other than the registered holder. Signatures on such
Outstanding Preferred Stock must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person
other than the registered holder(s) of the Outstanding
Preferred Stock, then such Letter of Transmittal, in order to
be validly tendered, must be endorsed or accompanied by
appropriate stock powers signed exactly as the name(s) of the
registered holder(s) appear on the Outstanding Preferred
Stock and accompanied by a properly completed form of consent
from the registered holder(s) with respect to the Proposed
Amendments (unless this requirement is waived by the Company
or unless the Requisite Acceptances are otherwise obtained by
the Company), with the signature(s) on the endorsement and
consent guaranteed by an Eligible Institution.
If this Letter of Transmittal or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their
authority so to act must be submitted.
7. Special Issuance and Delivery Instructions. Exchanging
Holders should indicate in the applicable box the name and
address to which the Common Stock and payment, if applicable,
with respect to Outstanding Preferred Stock for number of
shares not exchanged or not tendered, are to be issued or
sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance
in a different name, the tax identification or Social
Security number of the person named must also be indicated.
8. Waiver of Conditions. The Company reserves the right,
upon certain limited conditions specified in the Prospectus
under the heading "The Exchange Offer-Conditions of the
Exchange Offer," to waive any of the specified conditions of
the Exchange Offer, in whole at any time or in part from time
to time, in the case of any Outstanding Preferred Stock
tendered hereby. See "The Exchange Offer-Conditions of the
Exchange Offer" in the Prospectus.
9. Transfer Taxes. The Company shall pay all transfer
taxes, if any, applicable to the transfer and exchange of
Outstanding Preferred Stock to it or its order pursuant to
the Exchange Offer. If, however, delivery of the Common
Stock and payment with respect to Outstanding Preferred Stock
accepted for such exchange are to be made to, or are to be
registered or issued in the name of, any person other than
the registered holder of the Outstanding Preferred Stock
tendered hereby, or if tendered Outstanding Preferred Stock
is registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the transfer and exchange
of Outstanding Preferred Stock to the Company or its order
pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or
any other person) will be payable by such exchanging Holder.
10. Replacement Certificates. If a holder desires to tender
Outstanding Preferred Stock pursuant to the Exchange Offer
but is unable to locate the Outstanding Preferred Stock to be
tendered, such holder should write to or telephone the
Exchange Agent at the address and number set forth above
about procedures for replacing Outstanding Preferred Stock or
arranging for indemnification.
11. Substitute Form W-9. Each tendering holder is required
to provide the Exchange Agent with a correct taxpayer
identification number ("TIN") on Substitute Form W-9 which is
provided under "Important Tax Information" below, and to
indicate that the holder is not subject to backup withholding
by checking the box in Part 2 of the form. Failure to
provide the information on the form for an adequate basis for
exemption may subject the tendering holder to a $50 (or
greater) penalty imposed by the Internal Revenue Service, and
[20%] backup withholding on the payments made to the holder
or other payee with respect to Outstanding Preferred Stock
exchanged pursuant to an Exchange Offer. The box in Part 3
of the Form W-9 may be checked if the tendering holder has
not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is
checked and the Exchange Agent is not provided with a TIN
within sixty days, 31% of any payments on the Common Stock
may be withheld until a TIN is provided to the Exchange
Agent.
12. Requests for Assistance and Additional Copies. Requests
for assistance or for additional copies of the Prospectus,
this Letter of Transmittal, the Notice of Guaranteed Delivery
and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9, may be directed
to the Information Agent at the address and telephone numbers
set forth in the Prospectus.
Important: This Letter of Transmittal (or facsimile
hereof), together with Outstanding Preferred Stock and all
other required documents, or a Notice of Guaranteed Delivery,
must be received by the Exchange Agent prior to the
Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered
Outstanding Preferred Stock is accepted for exchange is
required by law to provide the Exchange Agent with such
holder's correct TIN on Substitute Form W-9 below. If the
Exchange Agent is not provided with the correct TIN, the
holder or other payee may be subject to a $50 (or greater)
penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such holder or other
payee with respect to Outstanding Preferred Stock exchanged
pursuant to an Exchange Offer may be subject to backup
withholding at a rate of 20%.
Certain holders of Outstanding Preferred Stock
(including, among others, all corporations and certain
foreign individuals) are not generally subject to these
backup withholding and reporting requirements. In order for
a foreign person to qualify for exemption from U.S.
withholding taxes, that holder must submit to the Exchange
Agent a properly completed Internal Revenue Service Form W-8,
Form 1001 or Form 4224, signed under penalties of perjury,
attesting to that person's exemption from withholding taxes.
Forms W-8, 1001 and 4224 can be obtained from the Exchange
Agent. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
By tendering Outstanding Preferred Stock pursuant to the
Exchange Offer, a holder that does not comply with the
conditions described above authorizes the Exchange Agent to
sell a principal amount of the Common Stock withheld so as to
enable it to satisfy its backup withholding obligation.
Pursuant to the backup withholding provisions of federal
income tax law, unless the conditions described above are
satisfied, the Exchange Agent will withhold (i) an amount of
any cash payable to a tendering holder of Outstanding
Preferred Stock pursuant to the Exchange Offer and (ii) a
principal amount of any Common Stock received by a tendering
holder of Outstanding Preferred Stock pursuant to the
Exchange Offer such that the sum of such cash and Common
Stock withheld will enable the Exchange Agent, after selling
such Common Stock, to remit the appropriate amount of backup
withholding due to the Internal Revenue Service with respect
to such Common Stock. Upon any such sale, the Exchange Agent
will be entitled to seek reimbursement from such noncomplying
holder for the costs, fees or expenses of such sale incurred
by it. Alternatively, the Exchange Agent may require such a
holder to remit a payment (in cash or certified check)
sufficient to cover the holder's backup withholding tax
liability prior to the release of any Common Stock withheld
from such holder. Backup withholding is not an additional
tax. Rather, the federal income tax liability of persons
subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of
taxes, a refund may be sought from the Internal Revenue
Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made to a
holder or other payee with respect to Outstanding Preferred
Stock exchanged pursuant to the Exchange Offer, the holder is
required to notify the Exchange Agent of the holder's correct
TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such
holder is awaiting a TIN) and that (i) the holder has not
been notified by the Internal Revenue Service that the holder
is subject to backup withholding as a result of failure to
report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that the holder is no longer
subject to backup withholding.
What Number to Give the Exchange Agent
The holder is required to give the Exchange Agent the
TIN (e.g., Social Security number or employer identification
number) of the record owner of the Outstanding Preferred
Stock. If the Outstanding Preferred Stock is in more than
one name or are not in the name of the actual owner, consult
the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
SUBSTITUTE
Form W-9
Department of the Treasury
Internal Revenue Service
Payer's Request for Taxpayer
Identification Number ("TIN") and
Certification
Part 1-PLEASE PROVIDE ________________________________
YOUR TIN IN THE BOX AT Social Security Number(s)
RIGHT AND CERTIFY BY OR
SIGNING AND DATING BELOW _________________________________
Employer Identification Number(s)
Part 2-Check the box if you are NOT subject to
backup withholding under the provisions of section
3406(a) of the Internal Revenue Code because (1)
you are exempt from backup withholding, (2) you
have not been notified that you are subject to
backup withholding as a result of failure to
report all interest or dividends, or (3) the
Internal Revenue Service has notified you that you
are no longer subject to backup withholding [ ]
CERTIFICATION: UNDER THE
PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED
THIS FORM IS TRUE, CORRECT, AND
COMPLETE
Signature Date
Part 3-
Awaiting TIN [ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 20% OF THE AMOUNT OF ANY COMMON STOCK DUE TO YOU
PURSUANT TO AN EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty days, 20% of all reportable payments made to me thereafter will
be withheld until I provide a number.
_____________________________________ ____________________________
Signature Date
ANNEX D
<PAGE>
NOTICE OF GUARANTEED DELIVERY
With Respect to Series B Cumulative Convertible
Preferred Stock, par value $1.00, of
LIVE ENTERTAINMENT INC.
This form or one substantially equivalent hereto must
be used to accept the Exchange Offer (as defined below) if
any shares of Series B Cumulative Convertible Preferred
Stock, par value $1.00, ("Outstanding Preferred Stock") of
the LIVE Entertainment Inc., a Delaware corporation (the
"Company"), are not lost but are not immediately available
or time will not permit all required documents to reach the
Exchange Agent by the Expiration Date (as defined in the
Prospectus, Consent Solicitation and Proxy Statement dated
[______], 1996 (the "Prospectus")). Such form may be
delivered by telegram, telex, facsimile transmission, mail
or hand delivery to the Exchange Agent. See "The Exchange
Offer-Guaranteed Delivery Procedures" in the Prospectus.
The Exchange Agent:
American Stock Transfer & Trust Co.
By Mail, Hand or Overnight Courier: By Facsimile:
(718) 234-5001
40 Wall Street
New York, NY 10005 Telephone:
Attention: Exchange Dept. (800) 935-5449
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION OF THIS
INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby represents that it "owns" the
Outstanding Preferred Stock tendered hereby within the
meaning of Rule 10b-4 under the Securities Exchange Act of
1934, as amended ("Rule 10b-4"), and hereby tenders to the
Company named in the Prospectus in compliance with Rule 10b-4 and
upon terms and subject to the conditions set forth in
the Prospectus and the accompanying Letter of
Transmittal/Consent Form (the "Letter of Transmittal")
(which together constitute the "Exchange Offer"), receipt of
which is hereby acknowledged, the number of shares of
Outstanding Preferred Stock specified below, pursuant to the
guaranteed delivery procedure set forth in the Prospectus
under "The Exchange Offer-Guaranteed Delivery Procedures."
The undersigned hereby tenders the Outstanding
Preferred Stock listed below and (i) to the extent that the
undersigned is the Record Holder (as defined in the
Prospectus) thereof, agrees and consents to the Proposed
Amendments (as defined in the Prospectus) with respect to
such Outstanding Preferred Stock and (ii) to the extent that
the undersigned is not the Record Holder, represents and
warrants to the Company that the Record Holder thereof has
executed, and the undersigned is delivering herewith, a
consent to the Proposed Amendments in the form set forth
below.
SIGN HERE
. . . . . . . . . . . . . . . . . . . .
Signature(s)
. . . . . . . . . . . . . . . . . . . .
Name(s) (Please Print)
. . . . . . . . . . . . . . . . . . . .
Address
. . . . . . . . . . . . . . . . . . . .
Zip Code
. . . . . . . . . . . . . . . . . . . .
Area Code & Tel. No. . . . . . . . . . .
Dated: , 199__
Certificate Numbers Number of
(if available) Shares Tendered
_____________________________ ____________________________
_____________________________ ____________________________
_____________________________ ____________________________
_____________________________ ____________________________
ONLY RECORD HOLDERS OF OUTSTANDING PREFERRED STOCK MAY
CONSENT TO THE PROPOSED AMENDMENTS. IF THE SIGNATURE ABOVE
IS NOT THAT OF THE RECORD HOLDER OF THE SECURITIES BEING
TENDERED, SUCH RECORD HOLDER MUST SIGN THE FOLLOWING CONSENT
OR A SEPARATE CONSENT WHICH MUST BE DELIVERED HEREWITH.
DELIVERY OF THE CONSENT TO THE EXCHANGE AGENT IS A CONDITION
TO THE VALID TENDER OF OUTSTANDING PREFERRED STOCK.
Pursuant to the Exchange Offer and the Company's
solicitation of consents to the Proposed Amendments (as
defined in the Prospectus), the undersigned Record Holder
hereby consents to the Proposed Amendments in respect of the
Outstanding Preferred Stock indicated above.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signature of Record Holder Signature of Record Holder
(if more than one)
Dated: , 199__
(Must be signed by the Record Holder(s) exactly as name(s)
appears on Outstanding Preferred Stock or on a security
position listing. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a
corporation, agent or other person acting in a fiduciary or
representative capacity, please provide the following
information and see Instruction 6 to the Letter of
Transmittal)
Names(s) . . . . . . . . . . . . . Address . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print) (Include Zip Code)
Capacity . . . . . . . . . . . . . Area Code & Tel. No.. . . . .
<PAGE>
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a member firm of a registered national
securities exchange, a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trust
company having an office in the United States, hereby
(i) guarantees that either the certificates representing the
Outstanding Preferred Stock tendered hereby in proper form
for transfer together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile
thereof), with any required signature guarantees and any
other documents required by the Letter of Transmittal, will
be received by the Exchange Agent at its address set forth
above within five New York Stock Exchange, Inc. trading days
after the date hereof, (ii) represents that such tender
complies with Rule 10b-4 under the Securities Exchange Act
of 1934, as amended ("Rule 10b-4"), and (iii) represents
that each holder of Outstanding Preferred Stock on whose
behalf this tender is being made is deemed to own the
Outstanding Preferred Stock being tendered within the
meaning of Rule 10b-4.
Name of Firm:. . . . . . . . . . . . Title: . . . . . . . . . . . .
Authorized Signature: Address: . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Zip Code
Area Code and Telephone Number:
Name:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Dated: , 199__
NOTE: DO NOT SEND CERTIFICATES WITH THIS FORM.
CERTIFICATES SHOULD BE SENT WITH THE LETTER OF
TRANSMITTAL.
<PAGE>
ANNEX E-1
<PAGE>
LIVE ENTERTAINMENT INC.
OFFER TO EXCHANGE: the Common
Stock Consideration consisting
only of shares of Common Stock
of LIVE Entertainment Inc.
valued at $_________ OR the
Cash and Common Stock
Consideration consisting of
cash and shares of Common
Stock of LIVE Entertainment
Inc. valued at $_________
FOR EACH: share of Series B
Cumulative Convertible
Preferred Stock, par value
$1.00 per share, of LIVE
Entertainment Inc.
To Securities Dealers, Commercial Banks,
Trust Companies, and Other Nominees:
LIVE Entertainment Inc., a Delaware corporation (the
"Company"), is offering to exchange for its Series B
Cumulative Convertible Preferred Stock, par value $1.00 per
share (the "Outstanding Preferred Stock"), upon the terms
and subject to the conditions set forth in the Prospectus,
Consent Solicitation and Proxy Statement dated [______],
1996 (the "Prospectus") and in the accompanying Letter of
Transmittal/Consent Form (the "Letter of Transmittal")
(which together constitute the "Exchange Offer"), the
consideration set forth below:
For Each: The Exchanging Holders Will Receive
Share of Outstanding The Common Stock Consideration valued at
Preferred Stock $________ OR the Cash and Common Stock
Consideration valued at $_________
The Common Stock Consideration
The Common Stock Consideration is equal to that number
of shares of the Company's Common Stock equal to $X divided
by the Market Price of the Company's Common Stock. The
Market Price will be determined based on a formula to be
finalized prior to the commencement of the Exchange Offer
but in no event less than [$MIN PRICE].
The Cash and Common Stock Consideration
The Cash and Common Stock Consideration is equal to a
total of $Z in total value comprised of a Cash Portion and
the remainder in Common Stock valued at the Market Price.
The Cash Portion available for each share of Outstanding
Preferred Stock which elects to receive the Cash and Common
Stock Consideration will equal $MMM divided by the number of
shares of Outstanding Preferred Stock which elect to receive
the Cash and Common Stock Consideration, but no more than $P
per share of Outstanding Preferred Stock. If every Holder
of Outstanding Preferred Stock ANNEX E elects to participate
in the Exchange Offer and to receive the Cash and Common
Stock Consideration, the Holders of Outstanding Preferred
Stock will receive $____________ per share of such
Outstanding Preferred Stock in cash and the remainder in
Company Common Stock valued as described above. If fewer
than ___% of the Holders of Outstanding Preferred Stock
elect to receive the Cash and Common Stock Consideration,
such Holders will receive $_______________ per share of such
Outstanding Common Stock and the remainder in Company Common
Stock.
We are asking you to contact your clients for whom you
hold Outstanding Preferred Stock registered in your name or
in the name of your nominee or who hold Outstanding
Preferred Stock registered in their own names.
The Company will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of
Outstanding Preferred Stock pursuant to the Exchange Offer,
and no such solicitation shall be made. You will be
reimbursed for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials
to your clients. The Company will pay all transfer taxes,
if any, applicable to the transfer and exchange of
Outstanding Preferred Stock to them or their order, except
as otherwise provided in the Letter of Transmittal.
A copy of each of the following documents is enclosed:
1. The Prospectus.
2. A Letter of Transmittal for the Exchange Offer for
your use and for the information of your clients.
3. A form of letter which may be sent to your clients
for whose account you hold Outstanding Preferred
Stock registered in your name or in the name of
your nominee.
4. The form of Notice of Guaranteed Delivery.
5. The Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
6. A return envelope addressed to American Stock
Transfer & Trust Company, the Exchange Agent.
Your prompt action is requested. The Exchange Offer
will expire at 5:00 p.m., New York City time on [______],
1996, unless extended by the Company. Outstanding Preferred
Stock tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the
section of the Prospectus entitled "Withdrawal Rights," at
any time prior to [______], 1996.
A holder of Outstanding Preferred Stock electing to
tender Outstanding Preferred Stock pursuant to the Exchange
Offer must complete and sign a Letter of Transmittal in
accordance with the instructions set forth therein and
forward or hand deliver such Letter of Transmittal and the
certificates representing the tendered Outstanding Preferred
Stock to the Exchange Agent at its address set forth on the
back cover page of the Prospectus. Tendering holders of
Outstanding Preferred Stock must consent to the Proposed
Amendments described in the Prospectus. Execution of a
Letter of Transmittal or a Notice of Guaranteed Delivery by
the registered holder will constitute a consent to the
Proposed Amendments with respect to all Outstanding
Preferred Stock tendered thereby. Letter of Transmittal and
Outstanding Preferred Stock should not be sent to the
Company. A holder of Outstanding Preferred Stock registered
in the name of a broker, dealer, commercial bank, trust
company or other nominee is urged to contact such registered
holder promptly if such holder wishes to accept the Exchange
Offer. A holder of Outstanding Preferred Stock who is
unable to tender his Outstanding Preferred Stock prior to
the Expiration Date may utilize the guaranteed delivery
procedures described in the Prospectus. A tendering holder
of Outstanding Preferred Stock who is not the registered
holder must provide a valid consent to the Proposed
Amendments from the registered holder with respect to all
tendered Outstanding Preferred Stock. A holder of
Outstanding Preferred Stock who utilizes the guaranteed
delivery procedures described therein and who is not a
registered holder must provide a valid consent to the
Proposed Amendments by completing, executing and delivering
a Letter of Transmittal or a form of consent executed by the
registered holder of the tendered Outstanding Preferred
Stock. See the sections in the Prospectus entitled "The
Exchange Offer-Proposed Amendments;" "-Procedures for
Tendering Outstanding Preferred Stock and Giving Consents;"
and "-Guaranteed Delivery Procedures."
Additional copies of the enclosed material and
additional information about the Exchange Offer may be
obtained from the Carreden Group Incorporated (the Information Agent
for the Exchange Offer) at (800) XXX-XXXX (call collect).
Very truly yours,
LIVE ENTERTAINMENT INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL
CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY, THE
INFORMATION AGENT, OR THE EXCHANGE AGENT, OR AUTHORIZE YOU
OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY
OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF
TRANSMITTAL.
<PAGE>
ANNEX E-2
<PAGE>
LIVE ENTERTAINMENT INC.
OFFER TO EXCHANGE: the Common
Stock Consideration consisting
only of shares of Common Stock
of LIVE Entertainment Inc.
valued at $_________ OR the
Cash and Common Stock
Consideration consisting of
cash and shares of Common
Stock of LIVE Entertainment
Inc. valued at $_________
FOR EACH: share of Series B
Cumulative Convertible
Preferred Stock, par value
$1.00 per share, of LIVE
Entertainment Inc.
To Our Clients:
Enclosed for your consideration is a Prospectus,
Consent Solicitation and Proxy Statement dated [______],
1996 (the "Prospectus") and form of Letter of
Transmittal/Consent Form (the "Letter of Transmittal")
relating to the offer of LIVE Entertainment Inc., a Delaware
corporation (the "Company") to exchange for all their share
of Series B Cumulative Convertible Preferred Stock, par
value $1.00 per share ("Outstanding Preferred Stock"), upon
the terms and subject to the conditions set forth in the
Prospectus and in the accompanying Letter of Transmittal
(which together constitute the "Exchange Offer"), the
consideration set forth below:
For Each: The Exchanging Holders Will Receive
Share of Outstanding The Common Stock Consideration valued at
Preferred Stock $_________ OR the Cash and Common Stock
Consideration valued at $_________
The Common Stock Consideration
The Common Stock Consideration is equal to that number
of shares of the Company's Common Stock equal to $X divided
by the Market Price of the Company's Common Stock. The
Market Price will be determined based on a formula to be
finalized prior to the commencement of the Exchange Offer,
but in no event less than [$MIN PRICE].
The Cash and Common Stock Consideration
The Cash and Common Stock Consideration is equal to a
total of $Z in total value comprised of a Cash Portion and
the remainder in Common Stock valued at the Market Price.
The Cash Portion available for each share of Outstanding
Preferred Stock which elects to receive the Cash and Common
Stock Consideration will equal $MMM divided by the number of
shares of Outstanding Preferred Stock which elect to receive
the Cash and Common Stock Consideration, but no more than $P
per share of Outstanding Preferred Stock. If every Holder
of Outstanding Preferred Stock elects to participate in the
Exchange Offer and to receive the Cash and Common Stock
Consideration, the Holders of Outstanding Preferred Stock
will receive $____________ per share of such Outstanding
Preferred Stock in cash and the remainder in Company Common
Stock valued as described above. If fewer than ___% of the
Holders of Outstanding Preferred Stock elect to receive the
Cash and Common Stock Consideration, such Holders will
receive $_______________ per share of such Outstanding
Common Stock and the remainder in Company Common Stock.
This material is being forwarded to you as the
beneficial owner of Outstanding Preferred Stock carried by
us in your account but not registered in your name. A
tender of such Outstanding Preferred Stock may only be made
by us as the Record Holder and pursuant to your
instructions. In addition, only we as the Record Holder may
consent to the Proposed Amendments described in the
Prospectus; such a consent is a condition to the valid
tender of Outstanding Preferred Stock. Therefore, the
Company urges holders of Outstanding Preferred Stock
registered in the name of a broker, dealer commercial bank,
trust company or other nominee to contact such Record Holder
promptly if they wish to accept either of the Exchange
Offer.
Accordingly, we request instructions as to whether you
wish us to tender any or all Outstanding Preferred Stock
held by us for your account and consent to the Proposed
Amendments pursuant to the terms and conditions set forth in
the enclosed Prospectus and the Letter of Transmittal.
Your instructions to us should be forwarded as promptly
as possible in order to permit us to tender Outstanding
Preferred Stock in accordance with the provisions of the
Exchange Offer. The Exchange Offer will expire at 5:00
p.m., New York City time, on [______], 1996, unless extended
by the Company.
If you wish to have us tender any or all of your
Outstanding Preferred Stock held by us for your account and
consent to the Proposed Amendments with respect thereto,
please so instruct us by completing, executing and returning
to us the instruction form which appears on the reverse side
of this letter. The accompanying Letter of Transmittal is
furnished for your information only and may not be used by
you to tender Outstanding Preferred Stock held by us for
your account.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter
and the enclosed material referred to therein relating to
the Exchange Offer of the Company relating to the
Outstanding Preferred Stock.
This will instruct you to tender the Outstanding
Preferred Stock indicated below held by you for the account
of the undersigned, pursuant to the terms and conditions set
forth in the Prospectus and the Letter of Transmittal.
[ ] Please tender Outstanding Preferred Stock held by you
for my account and consent to the Proposed Amendments
with respect thereto. I have identified on a signed
schedule attached hereto the number of shares of the
Outstanding Preferred Stock to be tendered if I wish to
tender and consent with respect to less than all my
Outstanding Preferred Stock.
[ ] Please do not tender Outstanding Preferred Stock held
by you for my account, but consent to the Proposed
Amendments with respect thereto. I have identified on
a signed schedule attached hereto the number of shares
of the Outstanding Preferred Stock with respect to
which consents are to be given if I wish to consent
with respect to less than all my Outstanding Preferred
Stock.
[ ] Please do not tender or consent with respect to any
Outstanding Preferred Stock held by you for my account.
______________________________
______________________________
Signature(s)
______________________________
Please print name(s) here
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN IN THE SPACE
PROVIDED, YOUR SIGNATURE(S) HEREON SHALL CONSTITUTE AN
INSTRUCTION TO US TO TENDER ALL OF YOUR OUTSTANDING
PREFERRED STOCK AND CONSENT TO THE PROPOSED AMENDMENTS.
<PAGE>
ANNEX F
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number
to Give the payer.-Social Security numbers have nine digits
separated by two hyphens: i.e. 000-00-0000. Employer
identification numbers have nine digits separated by one
hyphen: i.e. 00-0000000. The table below will help
determine the number to give the payer.
_________________________________________________________________
For this type of account: Give the NAME and
SOCIAL SECURITY
number of-
__________________________________________________________________
1. Individual The individual
2. Two or more The actual owner of the
individuals (joint account, or if combined
account) funds, the first individual
on the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The grantor-trustee(1)
revocable
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is
not a legal or
valid trust under
State law
5. Sole proprietorship The owner(3)
For this type of account: Give the NAME and
EMPLOYER
IDENTIFICATION
number of-
__________________________________________________________________
6. Sole proprietorship The owner(3)
7. A valid trust, estate, The legal entity
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable
educational, or other
tax exempt
organization
10. Partnership The partnership
11. A broker or The broker or nominee
registered nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
__________________________________________________________________
(1) List first and circle the name of the person whose
number you furnish.
(2) Circle the minor's name and furnish the minor's social
security number.
(3) Show the individual's name. See Item 5 or 6. You may
also enter your business name.
(4) List first and circle the name of the legal trust,
estate, or pension trust. (Do not furnish the
identifying number of the personal representative or
trustee unless the legal entity itself is not
designated in the account title.)
Note: If no name is circled when there is more than one
name, the number will be considered to be that of
the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer
identification number or you
don't know your number, obtain
Form SS-5, Application for a
Social Security Number Card, at
the local office of the Social
Security Administration or
Form SS-4, Application for
Employer Identification Number,
at the local office of the
Internal Revenue Service and
apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted
from backup withholding on all
payments include the following
payees:
- - An organization exempt
from tax under section 501(a), or an
IRA, or a custodial account under
section 403(b)(7).
- - The United States or any of its agencies or
instrumentalities.
- - A foreign government or any of its political
subdivisions, agencies or instrumentalities.
- - An international organization or any of
its agencies or instrumentalities.
- - A foreign central bank of issue.
Payees specifically exempted
from backup withholding on
payments of interest and
dividends include the payees
listed above and the following
payees:
- - A corporation.
- - A financial institution.
- - A dealer in securities or commodities
required to register in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A trust exempt from tax under section 664,
or described in section 4947.
- - An entity registered at all times under the
Investment Company Act of 1940.
- - A common trust fund operated by a bank under
section 584(a).
- - A nominee.
Payments of dividends and
patronage dividends not
generally subject to backup
withholding include the
following:
- - Payments to nonresident
aliens subject to withholding under
section 1441.
- - Payments to partnerships not engaged
in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends not paid in
money.
- - Payments made by certain foreign organizations.
Payments of interest not
generally subject to backup
withholding include the
following:
- - Payments of interest on obligations issued by
individuals. Note: You may be subject to backup
withholding if this interest is $600 or more
and is paid in the course of the payer's trade or
business and you have not provided your correct tax
identification number to the payer.
- - Payments of tax-exempt interest (including
exempt interest dividends under Section 852).
- - Payments described in section 6049(b)(5) to
nonresident aliens.
- - Payments on tax-free covenant bonds under
section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Exempt payees described above
should file Form W-9 to avoid
possible erroneous backup
withholding. FILE THIS FORM
WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER,
INDICATE BY CHECKING THE BOX
LABELED PART 2 WHETHER YOU ARE
EXEMPT AS TO ALL PAYMENTS, SIGN
AND DATE THE FORM, AND RETURN
IT TO THE PAYER.
Payments that are not subject
to information reporting are
also not subject to backup
withholding. For details, see
sections 6041, 6041A(a), 6042,
6044, 6049, 6050A, and 6050N,
and their regulations.
Privacy Act Notice-Section 6109
requires most recipients of
dividend, interest, or other
payments to give taxpayer
identification numbers to
payers who must report the
payments to IRS. IRS uses the
numbers for identification
purposes and to help verify the
accuracy of your tax return.
Payers must be given the
numbers whether or not you are
required to file tax returns.
Payers must generally withhold
31% of taxable interest,
dividend, and certain other
payments to a payee who does
not furnish a taxpayer
identification number to a
payer. Certain penalties may
also apply.
Penalties
(1) Penalty for Failure to
Furnish Taxpayer Identification
Number.-If you fail to furnish
your taxpayer identification
number to a payer, you are
subject to a penalty of $50 for
each such failure unless your
failure is due to reasonable
cause and not to willful
neglect.
(2) Failure to Report Amounts
Shown on an Information
Return-Failure to include in
gross income for any portion of
an amount reported on an
information return may result
in the imposition of a penalty
equal to 20% of the
underpayment of tax
attributable to such failure.
(3) Civil Penalty for False
Information With Respect to
Withholding-If you make a false
statement with no reasonable
basis which results in no
imposition of backup
withholding, you may be subject
to a penalty of $500.
(4) Criminal Penalty for
Falsifying Information-Falsifying
certifications or affirmations
may subject you to criminal
penalties including fines
and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
<PAGE>
ANNEX G
<PAGE>
[To Come]
<PAGE>
ANNEX H
<PAGE>
LIVE ENTERTAINMENT INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of LIVE Entertainment Inc. (the
"Company") hereby nominates, constitutes and appoints __________________
and _____________________, and each of them, the agent and proxy of the
undersigned, each with full power of substitution, to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote at
the Special Meeting of Stockholders of the Company to be held at The
Peninsula Beverly Hills, 9882 Little Santa Monica Boulevard, Beverly
Hills, California 90212, on Monday, _________________, 1996 at 10:00 a.m.,
and at any and all adjournments thereof, as fully and with the same force
and effect as the undersigned might or could do if personally present
thereat, as follows:
13. Approval of the Exchange Offer.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
14. The amendment of the terms of the Company's Restated
Certificate of Incorporation relating to the Outstanding
Preferred Stock in accordance with the Proposed Amendments.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
15. Eliminate the Company's 15,000,000 shares of Series A Common
Stock and increase the number of shares of Common Stock by a like
amount.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
16. Other Business. To transaction such other business as may
properly come before the meeting or any adjournments thereof.
(Please Sign and Date the Other Side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "FOR" ON THE PROPOSALS SET
FORTH ABOVE. THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE
WITH SUCH RECOMMENDATION OF THE BOARD OF DIRECTORS UNLESS A CONTRARY
INSTRUCTION IN INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE
WITH SUCH INSTRUCTIONS. IN ALL OTHER MATTERS, IF ANY ARE PRESENTED AT THE
MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS.
PLEASE SIGN AND DATE BELOW.
_________________________________________
DATED: __________________________________ (Signature of Stockholder)
I do do not expect to attend the meeting.
_________________________________________
(Signature of Stockholder)
(Please date this proxy and sign your name as it appears on the stock
certificate. Executors, administrators, trustees, etc. should give their
full title. All joint owners should sign.)
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF
DIRECTORS, AND MAY BE REVOKED
PRIOR TO EXERCISE BY FILING WITH
THE SECRETARY OF THE COMPANY AN
INSTRUMENT REVOKING THIS PROXY
OR A DULY EXECUTED PROXY BEARING
A LATER DATE OR BY APPEARING AND
VOTING IN PERSON AT THE MEETING.
<PAGE>
ANNEX I
<PAGE>
[To Come]
<PAGE>
ANNEX J
<PAGE>
AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK
OF
LIVE ENTERTAINMENT INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, being the duly elected Chief Executive Officer and
Secretary of LIVE Entertainment Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
(the "Board of Directors") by the Restated Certificate of Incorporation
of the Corporation, the Board of Directors has adopted the following
resolution creating a series of 1,900,000 shares of preferred stock
designated as Series B Cumulative Convertible Preferred Stock:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
conferred upon the Board of Directors of this Corporation in accordance
with the provisions of the Restated Certificate of Incorporation, there
is hereby established, authorized and created a series of the authorized
preferred stock of the Corporation, $1.00 par value per share, which
series shall be designated as:
"Series B Cumulative Convertible Preferred Stock,"
shall consist of [1,900,000] shares ("Series B Shares" or singularly, a
"Series B Share") and no more and shall have the following preferences and
relative, participating, optional and special rights and qualifications,
limitations and restrictions.
1. Dividend Rights
No dividends shall be payable upon the Series B Shares.
2. Rights on Liquidation
2.1 In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary ("Liquidation"), each Holder
of a Series B Share shall be entitled to receive with respect to such
Series B Share, after the satisfaction of all distributions to holders of
other classes or series of preferred stock, if any, which expressly rank
prior to the Series B Shares (as provided in Paragraph 6), (collectively,
the "Senior Payments"), but before any distribution is made to or set
aside for the holders of Common Stock or any other classes or series of
preferred stock of the Corporation, if any, which are not then required
to be redeemed or whose terms provide specifically that such class or
series rank junior to the Series B Shares (as provided in Paragraph 6),
distributions upon Liquidation, cash or any other assets of the Corpora-
tion in an amount equal to $10.00 per Series B Share (the "Liquidation
Preference").
2.2 If, after the satisfaction of all Senior Payments, the assets of
the Corporation available for distribution to Holders shall be
insufficient to permit the payment in full of the amount due the Holders
and the holders of other classes or series of preferred stock issued by
the Corporation whose terms provide specifically that such series shall
rank in parity with the Series B Shares (as provided in Paragraph 6), if
any, in accordance with their respective liquidation preferences, the
entire assets of the Corporation available for distribution to Holders
after the satisfaction of all Senior Payments shall be distributed pari
passu among the Holders and the holders of other classes or series of
preferred stock issued by the Corporation whose terms provide specifically
that such series shall rank in parity with the Series B Shares (as
provided in Paragraph 6), if any, in accordance with their respective
liquidation preferences. The fair market value of any assets of the
Corporation and the proportion of cash and other assets distributed by the
Corporation to the Holders of the Series B Shares shall be reasonably
determined in good faith by the Board of Directors.
2.3 A merger or consolidation of the Corporation with another
corporation or a voluntary sale of all or substantially all the assets of
the Corporation principally in exchange for stock and/or securities of
another corporation (any of the foregoing being herein referred to as a
"Merger") shall not be deemed a Liquidation, but only if any such event
occurs other than as part of a proceeding under Title 11 of the United
States Code or any federal or state law for the protection of creditors
or relief of debtors.
3. Voting Rights
The Holders shall have no voting rights.
4. Conversion Rights
A. Number of Series B Shares. Each Series B Share shall be
convertible, at the option of the Holder thereof, at the times provided
herein, into that number of shares of Common Stock obtained by dividing
the Liquidation Preference of such Series B Share by the "Conversion
Price" determined in accordance with Paragraph 4.C.
B. Time of Conversion. Series B Shares may be converted only
on each of the first business day following January 1, 1998, January
1, 1999 and January 1, 2000 and at no time thereafter.
C. Conversion Price. The conversion price per share of Common
Stock for purposes of conversion of the Series B Shares (the
"Conversion Price") shall be the greater of Market Price per share or
$____ per share (the "Minimum Price").
D. Shareholder Rights Plan. Upon Conversion, the Holders shall
receive Common Stock and any Shareholder Rights to which holders of
Common Stock were entitled at the Conversion Date, and no other
adjustment shall be made in respect to such Shareholder Rights or their
exercise.
E. Conversion Method. If the Series B Shares may be converted,
any Holder of Series B Shares may exercise the conversion rights as to
such Series B Shares by delivering to the Corporation during regular
business hours, at the office of the then transfer agent for the
Series B Shares or at such other place as may be designated in writing
delivered to all Holders by the Corporation, at least ten (10) business
days prior to the requested date for Conversion, a notice requesting
Conversion on a specified date and the certificate for the Series B
Shares to be converted, duly endorsed in blank or for transfer to the
Corporation (if required by it), or accompanied by separate instruments
of transfer satisfactory to the Corporation, in either case sufficient
to transfer the Series B Shares being converted free of any adverse
claim, and written notice stating the number of Series B Shares
represented by such certificate that the Holder elects to convert. The
notice shall also state the names and addresses of the persons to whom
certificates for shares of Common Stock shall be issued, the
denominations of such certificates and reasonable delivery instructions
with respect thereto. A notice failing to meet the foregoing
requirements shall not be valid or effective for any purpose. (The
Corporation may (but shall have no obligation to) from time to time
waive the requirement of ten (10) business days written notice.) If
the Series B Shares are not Redeemed as provided in Paragraph 5.B
below, each conversion shall be deemed to have been effected
immediately on the close of business on the date specified in such
notice (the "Conversion Date"), and the person in whose name any
certificate for shares of Common Stock is issuable upon the conversion
shall be deemed to have become the holder of record of the Common Stock
at such time. If the stock transfer books of the Corporation are
closed on the Conversion Date, the Conversion Date for purposes of
determining record ownership shall be the next succeeding day on which
the stock transfer books are open (and the conversion shall be deemed
to have been effected immediately prior to the close of business on
that day), but in all cases the conversion shall be at the Conversion
Price in effect on the Conversion Date specified in the notice of
conversion. As promptly as practicable after the Conversion Date (but
in any event within 10 business days), the Corporation shall issue and
deliver to such Holder, at the expense of the Corporation and in
accordance with such Holder's delivery instructions, a certificate or
certificates for the number of full shares of Common Stock to which
such Holder is entitled and a check or cash with respect to any
fractional interest in a share of Common Stock as provided in
Paragraph 4.I below. Upon conversion of only a portion of the Series B
Shares represented by a certificate surrendered for conversion, the
Corporation shall issue and deliver to such Holder, at the expense of
the Corporation, a new certificate covering the number of Series B
Shares representing the unconverted portion of the certificate so
surrendered and which new certificate shall entitle the Holder thereof
to the same rights of the Series B Shares represented thereby as if the
certificate theretofore covering such unconverted Series B Shares had
not been surrendered for conversion.
F. Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of Series B Shares. If more than
one Series B Share shall be surrendered for conversion at any one time
by the same Holder, the number of full shares of Common Stock issuable
upon conversion of such Series B Shares shall be computed on the basis
of the aggregate number of Series B Shares so surrendered. Instead of
any fractional shares of Common Stock which otherwise would be issuable
upon conversion of any Series B Shares, the Corporation shall pay a
cash adjustment in respect of such fractional interest based upon the
Conversion Price in effect at the close of business on the last
business day prior to the Conversion Date.
G. Taxes. All shares of Common Stock issued upon conversion of
Series B Shares will be validly issued, fully paid and nonassessable.
The Corporation shall not pay any documentary stamp or similar issue
or transfer taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of Series B Shares
pursuant hereto.
H. Unauthorized Series B Shares. All certificates representing
Series B Shares surrendered for conversion or redemption shall be
appropriately cancelled on the books of the Corporation and the
Series B Shares so converted or redeemed represented by such
certificates shall be restored to the status of authorized but unissued
Series B Shares.
I. Market Price. The term "Market Price" per share of Common
Stock on any day shall mean the average of the closing prices (as
defined below) on the principal national stock exchange on which the
Common Stock is then listed, or, if not so listed, on the National
Association of Securities Dealers Inc. Automated Quotation System (the
"NASDAQ System"), in each case, for the 20 consecutive Trading Days
immediately preceding the date of determination. A "Trading Day" is
a business day in which the principal market on which the Common Stock
is traded is open for trading for at least four hours. As used herein,
the "closing price" per share of Common Stock for each day shall be the
last reported sales price per share, regular way on such day, or if
there are no sales on such day, on the immediately preceding day on
which such sales occurred; provided that if at the time of any
computation pursuant to this paragraph the Common Stock is not then
traded on any trading market, the "Market Price" for the purposes
hereof shall be the fair value as reasonably determined in good faith
by the Board of Directors of the Corporation.
J. Available Common Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of
Series B Shares, such number of shares of Common Stock as shall from
time to time be sufficient to effect a conversion of all outstanding
Series B Shares under Paragraph 4.A and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding Series B Shares, the
Corporation shall promptly take such corporate action as may, in the
opinion of its counsel and subject to any necessary approval of its
stockholders, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
K. Notice to Holders. In the event the Corporation declares a
stock split, stock dividend or reverse stock split, the Minimum Price
shall be appropriately adjusted by the Corporation's Board of Directors
to equitably reflect the intention of this provision. Should such
event occur during the period of determination of the Market Price, a
similar appropriate adjustment in the Conversion Price shall be made.
L. Initial Issuance. For all purposes the "Initial Issuance"
of the Series B Shares shall be deemed to have occurred on the first
day of the month following the month in which the Series B Shares are
first actually issued.
5. Redemption Rights
A. Redemption - Generally. Except as set forth in Paragraphs
5.B and 5.E below, the Corporation may, at its option, redeem (a
"Redemption") at the Liquidation Preference per Share on the Redemption
Date ("Redemption Price"), from funds legally available therefor all
or any number of the outstanding Series B Shares.
B. Notice of Redemption. If the Corporation elects to redeem
any portion of or all of the Series B Shares pursuant to a Redemption
at its option, the Corporation shall (a) give written notice of such
Redemption ("Redemption Notice") to each Holder of Series B Shares at
its address as it appears on the stock records of the Corporation by
deposit thereof in first class U.S. mail, postage prepaid, and (b)
deposit in trust for the pro-rata benefit of the Holders of Shares so
called for Redemption the funds necessary for such Redemption with a
bank or trust company in the Borough of Manhattan, The City of New
York, having a capital and surplus of at least $100,000,000 (an
"Approved Bank"), and the Series B Shares then subject to Redemption
shall, on the date which is twenty (20) days after the giving of the
Redemption Notice in accordance with clause (a) of this sentence and
no earlier than the date of the deposit of funds in accordance with
clause (b) of this sentence (the "Redemption Date"), cease to be
outstanding and the rights of the Holders and owners thereof shall be
limited to payment of the Redemption Price as of the Redemption Date
in accordance with the terms hereof. The Corporation shall mail to
each Holder of a Share tendered for Redemption the Redemption Price
thereof by check within ten (10) business days after the Corporation
shall receive at its principal office a certificate representing the
applicable Series B Share (or an affidavit of lost certificate and
indemnity therefor in a form prescribed by the Board of Directors) duly
endorsed in blank for transfer to the Corporation (if required by it),
or accompanied by separate instruments of transfer satisfactory to the
Corporation and sufficient to transfer the Series B Shares being
converted free of any adverse claim. Should any Holder not receive
payment of any amounts due on Redemption of his Series B Shares at the
times prescribed by reason of the Corporation's failure to give a
Redemption Notice at the times or in the manner prescribed above or to
make payment at the times prescribed above for any reason other than
the Holder's failure properly to tender its Series B Shares as provided
above, the Corporation shall pay to the applicable Holder on demand
interest on the sums not paid when due at an annual rate equal to one
percent in excess of the "Prime Rate" that is then in effect or
announced by Chemical Bank, New York, New York, or its successor,
compounding at the end of each thirty (30) days, until the applicable
Holder is paid in full. The Redemption Price shall (in the discretion
of the Board of Directors of the Corporation) be adjusted to take into
account any stock split or other similar change in the Series B Shares.
Any monies deposited by the Corporation for the Holders of Series B
Shares subject to Redemption in accordance with this Paragraph 5.C
which shall not be claimed at the end of one (1) year after the first
giving of the applicable Redemption Notice shall be released to the
general funds of the Corporation but shall be paid to the Holder of the
applicable Series B Shares so long as submission of its Series B Shares
occurs within the shorter of ten (10) years after the first mailing of
the applicable Redemption Notice and as may be required with respect
to any laws of escheat or pertaining to abandoned property. After such
release, any such bank or trust company shall, upon demand, pay over
to the Corporation such unclaimed amounts and thereupon such bank or
trust company shall be relieved of all responsibility in respect
thereof to such Holder and such Holder shall look only to the
Corporation for the payment of the applicable Redemption Price. Any
interest accrued on funds deposited pursuant to Paragraph 5.C shall be
paid from time to time to the Corporation for its own account.
C. Redemption by Lot. The Corporation shall select the Series B
Shares to be redeemed in any Redemption in which not all Series B
Shares are required or permitted to be redeemed by lot or by a
substantially equivalent method determined by the Board of Directors
to be fair and equitable. Should any Series B Shares to be redeemed
under the terms hereof not be redeemed solely by reason of limitations
imposed by law, the applicable Series B Shares shall be redeemed on the
earliest possible date thereafter that the applicable Series B Shares
may be redeemed to the maximum extent permitted by law. Except as set
forth above, the Board of Directors shall prescribe the manner in which
any Redemption shall be effected.
6. Ranking of Stock of the Corporation
For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
A. Prior to the Series B Shares, upon liquidation, if the
holders of such class or classes shall be entitled to the receipt of
amounts distributable upon dissolution, liquidation or winding up of
the Corporation, as the case may be, in preference or priority to the
Holders;
B. On a parity with the Series B Shares, upon liquidation,
whether or not redemption or liquidation prices per share or sinking
fund provisions, if any, are different from those of the Series B
Shares, if the holders of such stock shall be entitled to the receipt
of amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in proportion to their
respective liquidation prices, without preference or priority, one over
the other, as between the holders of such stock and the Holders; and
C. Junior to the Series B Shares, upon liquidation, if such
class shall be Common Stock or if the Holders shall be entitled to
receipt of amounts distributable upon dissolution, liquidation, winding
up of the Corporation, or upon redemption as the case may be, in
preference or priority to the holders of shares of such class or
classes.
7. Amendments
From time to time any of the provisions of this Certificate of
designations may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may
be added Or inserted in the manner and the time prescribed by such laws,
and all rights at any time conferred upon the stockholders of the
Corporation by this Restated Certificate of Designations are granted
subject to the provisions of this Section 7.
RESOLVED FURTHER, that the Chief Executive Officer or Vice President
and the Secretary or any Assistant Secretary of the Corporation are each
authorized to do or cause to be done all such acts or things and to make,
execute and deliver or cause to be made, executed and delivered all such
agreements, documents, instruments and certificates in the name and on
behalf of the Corporation or otherwise as they deem necessary, desirable
or appropriate to execute or carry out the purpose and intent of the
foregoing resolutions.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury as of
this __th day of __________, 1996.
_________________________________________
Roger A. Burlage, Chief Executive Officer
ATTEST:
___________________________________
Ronald B. Cushey, Secretary
<PAGE>
EXHIBIT 13
Letters of Transmittal and Outstanding Preferred Stock and
any other required documents should be sent by each Holder of
Outstanding Preferred Stock or his broker, dealer, bank or other
nominee to the Exchange Agent at the address set forth below:
The Exchange Agent:
American Stock Transfer & Trust Company
By Mail, Hand By Facsimile:
or Overnight Courier [(718) 234-5001]
40 Wall Street
New York, New York 10005 Telephone:
Attention: [Henry Reinhold] [(718) 921-8200]
Any questions or requests for assistance or additional copies
of this Prospectus and the Letters of Transmittal may be directed
to the Information Agent at its address and telephone number set
forth below. Holders of Outstanding Preferred Stock may also
contact their broker, dealer or other nominee concerning the
Solicitations:
The Information Agent:
By Mail, Hand or By Facsimile:
Overnight Courier: (212) 332-1313
Carreden Group Incorporated
610 Fifth Avenue, Rockefeller Center Telephone:
New York, New York 10020 (800) XXX-XXXX
Attention: Fred Ermel
Joe Huertas
CARREDEN GROUP
Incorporated
SUITE 7967
ONE WORLD TRADE CENTER
NEW YORK, NY (USA) 10048
Investment Banking
Tel. (212) 488-8570 Registered Broker/Dealer
Fax (212) 488-8573 Member NASD
Engagement Letter
CONFIDENTIAL
March 14, 1996
Mr. Roger A. Burlage, President and Chief Executive Officer
Live Entertainment, Inc.
1540O Sherman Way
Suite 500
Van Nuys' CA 91406
Re: Shareholder Enhancement Plan
Gentlemen:
Carreden Group, Incorporated ( Carreden) is please to act as exclusive
financial advisor to Live Entertainment, Inc.(the "Company'')' in connection
with a proposed rationalization of the Company's current capital structure as
approved by the Company's Board of Directors (the "Enhancement Transaction").
This agreement confirms the terms of Carreden's engagement
As used herein, Enhancement Transaction means, whether effected in one
transaction or a series of transactions, (a) amendment of the terms and
conditions of certain of the Company's outstanding equity securities and (b)
the exchange of certain of the Company's outstanding equity securities and
debt obligations from the holders thereof (the "Security Holders") for (i)
new classes of securities - equity, debt or other; (ii) cash or cash
equivalents; or (iii) any combination of (i) and/or (ii). The raising of new
money by the Company may also be included in an Enhancement Transaction. Any
such proposed Enhancement Transaction must be acceptable to the Company.
Carreden will assist the Company in the proposed Enhancement Transaction by
providing financial advisory services as may be appropriate, and as more
fully described in Exhibit I attached.
In consideration for the services to be rendered under this Agreement, the
Company agrees:
(1) to pay Carreden $25,000 in cash upon the execution of this Agreement
and an additional $25,000 thirty (30) days subsequent to the date of
the Agreement;
(2) to pay Carreden a cash transaction fee at closing(s) of the Enhancement
Transaction in an amount equal to one and one-half percent (1.5%) of the
market value of common stock, total liquidation value of any preferred stock
and/or principal amount of securities restructured; and
(3) to pay Carreden a cash fee for raising new money, in the event any funds
are raised in connection with or incidental to the enhancement Transaction,
in an amount based upon the following:
(a) five percent (5%) of the amount of any common or preferred equity, plus
(b) two (2.0%) of the amount of any subordinate debt or of any debt
convertible into equity of the Company, and
(c) one-half percent (0.5%) of the amount of any senior secured debt
raised.
Both parties acknowledge that (a)any Enhancement Transaction must deal with all
of the Company's Series B Cumulative Preferred Stock (the "Series B Shares"),
whether by exchange into a more stable corporate security or by amendment to
the terms of the Series B Shares to remove the more onerous provisions
thereof, and should also deal with the Company's $40 Million senior
subordinated debt, (b) any restructuring, redemption, conversion or exchange
of the Series C Preferred Shares held by Pioneer Electronics or its
affiliates will not be included in the calculation of any fees payable to
Carreden, (c) fees payable to Carreden pursuant to the above Subparagraph (3)
(a), (b) and (c) shall be reduced by one-half in the event new money is
raised from sources whom the Company identified and had investment
discussions with prior to or as of the date of this Agreement, as shown in
Exhibit II and (d) any retainer fees paid to Carreden hereunder will be
credited against any transaction or other fee payable to Carreden in
connection with the Enhancement Transaction.
Carreden shall be entitled to its full fees set forth above if (a) prior to
termination an enhancement transaction supported by the Company's Board of
Directors was proposed in writing to the Security Holders and (b) within one
year after the termination of Carreden's services hereunder, such enhancement
transaction fees are only due and payable at the closing thereof.
In addition to any fees payable to Carreden, the company will reimburse
Carreden, upon request made from time-to-time, for all of its reasonable
out-of-pocket expenses, up to $10,000 unless amended in writing by the
Company, incurred in connection with this engagement.
Carreden's financial advisory services under this Agreement shall be provided
by Frederick C. Ermel, Joseph J. Huertas or Lorna B. Goodrich. Should any
other professionals be assigned by Carreden to assist in providing advisory
services hereunder, such professionals must be (a) reasonably acceptable to
the Company and (b) solely at Carreden's expense.
The Company agrees to the indemnification and other agreements set forth in the
Indemnification Agreement attached hereto, the provisions of which are
incorporated herein by reference and shall survive the termination,
expiration or supersession of this Agreement.
Carreden's engagement hereunder may be terminated by either the Company or
Carreden at any time upon written notice to that effect to the other party,
it being understood that the provisions relating to the payment of fees and
expenses and indemnification in accordance with this Agreement will survive
any such termination. Unless earlier terminated, this Agreement will
automatically terminate one year from the date hereof.
This Agreement will be governed by, and construed in accordance with, the laws
of the State of New York, applicable to agreements made and to be performed
entirely in such State. This Agreement may not be assigned by either party
without the prior written consent of the other party.
This Agreement (including the attached Indemnification Agreement) embodies the
entire agreement and understanding between the parties hereto and supersedes
all prior agreements and understandings relating to the subject matter
hereof. If any provision of the Agreement is determined to be invalid or
unenforceable in any respect, such determination will not affect such
provision in any other respect or any other provision of this Agreement,
which will remain in full force and effect. This Agreement may not be
amended or otherwise modified or waived except by an instrument in writing
signed by both Carreden and the Company.
Please confirm that the foregoing correctly sets forth our agreement by signing
and returning to Carreden the enclosed duplicate copy of this Agreement.
Very truly yours,
CARREDEN GROUP, INCORPORATED
By: ________________________________
Frederick C. Ermel
President
Accepted and Agreed to as of the
date first written above:
LIVE ENTERTAINMENT, INC.
By: _________________________________
Roger A. Burlage
President and Chief Executive Officer
Exhibit I
Financial advisory services to be performed under this Engagement Agreement may
include, but may not be limited to, the following:
(a) reviewing the Company's business and operations, business plans and
strategies and prospects;
(b) analyzing the Company's current balance sheet, financial position and
market performance of its publicly traded securities;
(c) performing comparative market analyses as may be appropriate,
contrasting the Company with other comparable publicly traded companies;
(d) reviewing the Company's articles of incorporation, corporate by-laws,
recent Board of Director's minutes, indentures and other relevant
documents;
(e) meeting with Company officials, legal counsel and other advisors and
consultants as often and as necessary as both the Company and Carreden
deem reasonable in order to assist the Company in developing an
acceptable balance sheet rationalization plan;
(f) if appropriate, discussing the Company's plans and strategies with
selected Security Holders to determine, among other things, the range of
possible rationalization plan alternatives;
(g) proposing to Company officials various financial alternatives to
restructure the Company's balance sheet, including a review of the
various studies and analyses conducted by Carreden;
(h) assisting the Company in evaluating and selecting the structural
alternative that will accomplish its strategic and financial objectives,
including assisting in preparing and presenting relevant information
including, if required, a fairness opinion to the Company's Board of
Directors with respect to an authorization to proceed (which opinion may
be filed with the Securities and Exchange Commission, if required;
(i) assisting the Company in preparing the necessary documentation
descriptive of the Enhancement Transaction;
(j) on behalf of the Company, contacting and meeting with Security Holders
and their legal, financial or other advisors, as appropriate, to provide
information explaining the Company's restructuring proposal;
(k) working with interested participants in the Enhancement Transaction and
representing the Company in negotiations with respect to the Enhancement
Transaction;
(l) if appropriate, coordinating with new sources capital, including those
sources identified by either the Company or Carreden, with respect to the
Enhancement Transaction;
(m) participating in any due diligence process that may be conducted by
participants in the Enhancement Transaction; and
(n) assisting in the closing(s) of the Enhancement Transaction.
LIVE ENTERTAINMENT, INC.
15400 Sherman Way
Suite 500
Van Nuys, CA 91406
Indemnification Agreement
March 14, 1996
Carreden Group, Inc.
One World Trade Center
Suite 7967
New York, NY 10048
Gentlemen:
In connection with the engagement of Carreden Group, Inc. ("Carreden") to
advise and assist us with the matters set forth in the Agreement dated the
date hereof between us and Carreden, we hereby agree to indemnify and hold
harmless Carreden, its affiliated companies, and each of Carreden's and such
affiliated companies' respective officers, directors, agents, employees and
controlling persons (within the meaning of each of Section 20 of the
Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933)
(each of the foregoing, including Carreden, being hereinafter referred to as
an "Indemnified Person") to the fullest extent permitted by law from and
against any and all losses, claims, damages, expenses (including reasonable
fees and disbursements of counsel), actions (including shareholder derivative
actions), proceedings or investigations (whether formal or informal), or
threats thereof (all of the foregoing being hereinafter referred to as
"Liabilities"), based upon, relating to or arising out of such engagement or
any Indemnified Person's role therein; provided, however, that we shall not
be liable under this paragraph: (a) for any amount paid in settlement of
claims without our consent, which consent shall not be unreasonably withheld,
or (b) to the extent that it is judicially determined that such Liabilities
resulted primarily from the willful misconduct, bad faith or gross negligence
of the Indemnified Person seeking Indemnification. In connection with our
obligation to indemnify for expenses as set forth above, we further agree to
reimburse each Indemnified Person for all such expenses (including reasonable
fees and disbursements of counsel) as they are incurred by such Indemnified
Person, provided, however, that if an Indemnified Person is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded
to the extent it is finally judicially determined that the Liabilities in
question resulted primarily from the willful misconduct, bad faith or gross
negligence of such Indemnified Person.
Promptly after Carreden receives notice of the commencement of any action or
other proceeding in respect of which indemnification or reimbursement may be
sought hereunder, Carreden will notify us thereof; but the omission so to
notify us shall not relieve us from any obligation hereunder unless, and only
to the extent that, such omission results in material adverse consequences to
us. If any such action or other proceeding shall be brought against any
Indemnified Person, we shall, upon written notice given reasonably promptly
following your notice to us of such action or proceeding, be entitled to
assume the defense thereof at our expense with counsel chosen by us and
reasonably satisfactory to the Indemnified Person; provided, however, that
any Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, such Indemnified
Person shall have the right to employ separate counsel at our expense and to
control its own defense of such action or proceeding if (i) there are or may
be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available
to us and, in the reasonable opinion of the Indemnified Person, cannot be
asserted by counsel chosen by us, or (ii) in the reasonable opinion of
counsel to such Indemnified Person, a conflict or potential conflict exists
between us and such Indemnified Person that would make such separate
representation advisable; provided, however, that in no event shall we be
required to pay fees and expenses under this indemnity for more than one firm
of attorneys in any jurisdiction in any one legal action or group of related
legal actions.
If the indemnification or reimbursement provided for hereunder is finally
judicially determined by a court of competent jurisdiction to be unavailable
to an Indemnified Person in respect of any Liabilities (other than as a
consequence of a judicial determination of willful misconduct, bad faith or
gross negligence of such Indemnified Person), then we agree, in lieu of
indemnifying such Indemnified Person, to contribute to the amount paid or
payable by such Indemnified Person as a result of such Liabilities (i) in
such proportion as is appropriate to reflect the relative benefits received,
or sought to be received, by us on the one hand and by such Indemnified
Person on the other from the transactions in connection with which Carreden
has been engaged or (ii) if (but only if) the allocation provided in clause
(i) of this sentence is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
such clause (i) but also the relative fault of us and of such Indemnified
Persons exceed the amount of fees actually received by Carreden pursuant to
such engagement. The relative benefits received or sought to be received by
us on the one hand and by Carreden on the other shall be deemed to be in the
same proportion as (a) the total value of the transactions with respect to
which Carreden has been engaged bears to (b) the fees paid or payable to
Carreden with respect to such engagement.
The rights accorded to Indemnified Persons hereunder shall be in addition to
any rights that any Indemnified Person may have at common law, by separate
agreement or otherwise.
This agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and to be performed
entirely in such state. This agreement may not be amended or otherwise
modified except by an instrument signed by both Carreden and us. If any
provision hereof shall be determined to be invalid or unenforceable in any
respect, such determination shall not affect such provision in any other
respect or any other provision of this agreement, which shall remain in full
force and effect.
The foregoing indemnification agreement shall remain in effect indefinitely,
notwithstanding any termination of Carreden's engagement.
Very truly yours,
By: ______________________
Name: Roger A. Burlage
Title: President and Chief Executive Officer
Acknowledged and Agreed to:
Carreden Group, Inc.
By : _______________________
Name: Frederick C. Ermel
Title: President
