FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (date of earliest event reported): July 9, 1997
LIVE Entertainment Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-21748 95-4178252
--------------- ----------------- --------------
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
15400 Sherman Way, Suite 500, Van Nuys, CA 91406
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (818) 988-5060
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant
LIVE Entertainment Inc. ("LIVE") believes that the
transaction described below constitutes a change of control.
At a Special Meeting of Stockholders held at 10:00 a.m. on
July 9, 1997, the Stockholders of LIVE approved by a vote of
2,537,839 (98.1%) in favor, 46,794 (1.8%) against and 1,504
(0.06%) abstaining, the Agreement and Plan of Merger dated April
17, 1997 (the "Merger Agreement") by and among LIVE, Film
Holdings Co. and Film Acquisition Co., which was more fully
described and previously reported on Form 8-K filed by Registrant
on April 30, 1997 and in LIVE's Proxy Statement dated June 16,
1997. The Merger was consummated shortly after the Merger vote,
and LIVE is now a wholly owned subsidiary of Film Holdings Co.
Under the Merger Agreement, the holders of LIVE Common Stock
will receive $6.00 per share; the holders of LIVE Series B
Cumulative Convertible Preferred Stock will receive $10.00 per
share plus dividends accrued and unpaid through July 9, 1997; and
the holders of LIVE Series C Convertible Preferred Stock will
receive $944.8624 per share. Concurrently with the closing of
the Merger, LIVE issued a Notice of Redemption for its Increasing
Rate Secured Senior Subordinated Notes due 1999 (the "Increasing Rate Notes")
with a Redemption Date of August 8, 1997. The redemption price of the
Increasing Rate Notes will be at par plus accrued interest.
Holders of LIVE's securities will be receiving notices
related to payment of the Merger consideration from the Company's
Transfer Agent, American Stock Transfer & Trust Company.
Holders of the Company's Common Stock will also receive a
"Supplemental Disclosure -- Extension of Appraisal Rights" being
distributed as part of a memorandum of understanding dated June
30, 1997 in settlement of a class action lawsuit filed in the
Chancery Court of Delaware, Richard C. Goodwin vs. LIVE
Entertainment Inc., et al., C.A.No. 15765NC. Under the
settlement, LIVE made no admission of liability but agreed to
allow its holders of Common Stock an extended opportunity to
exercise Appraisal Rights under Delaware Law through August 8, 1997.
Financing for the Merger was provided by an equity infusion
from affiliates of Richland, Gordon & Co. and Bain Capital, Inc.,
Senior Subordinated Secured Notes due 2004 from managed accounts
and affiliates of Canyon Capital Management, L.P., and a new
working capital and term loan facility provided by The Chase
Manhattan Bank.
Attached as Exhibit 1 is the "Supplemental Disclosure --
Extension of Appraisal Rights" being sent to holders of Common
Stock. Exhibit 2 is the suggested letter for Brokers to send to
their clients holding Common Stock of LIVE Entertainment Inc..
Item 7. Exhibits
Exhibit 19.1 Supplemental Disclosure -- Extension of Appraisal Rights
Exhibit 19.2 Broker letter to clients holding Common Stock
of LIVE Entertainment Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
LIVE ENTERTAINMENT INC.
Date: July 14, 1997 By: /s/ RONALD B. CUSHEY
Name: Ronald B. Cushey
Title: Executive Vice President and
Chief Financial Officer
Exhibit 19.1
LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, CA 91406
July 9, 1997
Supplemental Disclosure -- Extension of Appraisal Rights
To: The Stockholders of LIVE Entertainment Inc.
Terms used in this Supplemental Disclosure are as defined in
the June 16, 1997 Proxy.
On Monday, June 23, 1997, a class action lawsuit was filed in
the Chancery Court of Delaware, Richard C. Goodwin vs. LIVE
Entertainment Inc., et al., C.A.No. 15765NC, alleging insufficient
disclosure in the June 16, 1997 Proxy previously delivered to you.
The case has been settled pursuant to a memorandum of understanding
dated June 30, 1997. Under the settlement, LIVE made no admission
of liability but has agreed to distribute this Supplemental
Disclosure and to allow its Common Stockholders an extended
opportunity to exercise Appraisal Rights under Delaware Law through
August 8, 1997, four weeks after the Merger closed, should they so
determine after reviewing the information that follows. (See the
discussion of Appraisal Rights on page 8 hereof and on page 34 of
the June 16, 1997 Proxy.)
The plaintiff alleged that the Company misled stockholders by
failing in June 1997 to disclose forecasts included in an August
1996 Schedule 13E-4 filing for a proposed recapitalization (which
was neither implemented nor distributed to the Company's
stockholders), which forecasts plaintiff alleged might indicate a
value for Common Stock higher than the Common Stock Merger Price to
be offered to the stockholders in the transaction which is the
subject of this Supplemental Disclosure. The plaintiff also
alleged that the Directors breached their duties of loyalty and
care by endorsing the Merger Transaction rather than a potential
alternative recapitalization and that statements concerning
dilution inherent in an alternative transaction were misleading.
Supplemental Disclosure.
The August 1996 forecasts were prepared based on assumptions
and facts which have not occurred and which forecast income in
excess of the Company's current business plan. For example, films
which were included in the August 1996 forecasts for 1997 release
were delayed to later years or will not be produced at all. The
August 1996 forecast projected net income of $4,315,000 for 1996;
in 1996 the Company lost $3,437,000. For the 1998 fiscal year, the
August 1996 forecast projected anticipated revenues, net income and
EBITDA of $331 million, $23 million and $46 million respectively,
in contrast to the 1998 fiscal year anticipated revenues, net
income and EBITDA of $243 million, $16 million and $33 million,
respectively, in the March 1997 Business Plan described below.
Thus, the August 1996 projections were not considered by the Board
in its April 1997 deliberations on the Canyon Proposal or the
Merger Proposal.
However, the Company does prepare business plans on a regular
basis. Such a business plan was prepared in March 1997 (the "March
Business Plan") for review by the Company's Board of Directors at
its April 1997 Board Meetings (the Board Meetings at which the
Canyon Proposal and the Merger Proposal were discussed).
Information substantially similar to that contained in the
Company's March Business Plan was also provided to Houlihan Lokey
Howard & Zukin to assist them in preparing their Fairness Opinion
referred to in the June 16, 1997 Proxy, and the Houlihan Lokey
discounted cash flow analysis in the Fairness Opinion was based
upon that information. (Houlihan Lokey was also provided with a
copy of the August 1996 forecasts but did not rely on them.) The
March Business Plan is described in summary form below.
The March Business Plan was based upon a number of
assumptions which are outlined below and, while they appeared
reasonable in March when the Plan was prepared by Company
management, have since proved to be optimistic in certain respects
and are not reflective of the Company's current operations and
internal forecasts. For example, the Company reported a loss of
$2.5 million in the quarter ended March 31, 1997 rather than a
forecasted loss of $800,000. In addition, certain films which were
released generated revenues less than those projected, other films'
anticipated release dates were delayed into 1998, planned new
productions were deferred, and it has taken longer than expected
for the Company to secure new financing than originally
anticipated. Also, as noted in the June 16, 1997 Proxy, adoption
of the Canyon Proposal (which would have provided financing less
favorable to the Company than the financial assumptions on which
the March Business Plan was predicated) required the consent of a
majority of the holders of the Company's Series B Preferred Stock.
The members of the Board of Directors elected by those holders
informed the Board at the April 1997 Board meetings that the Canyon
Proposal would not be accepted in light of the Merger Proposal and
therefore the significant assumptions underlying the March Business
Plan were not capable of implementation in any event. Finally, the
actual results for 1997 through 1999 after completion of the Merger
are likely to be materially different from those reflected in the
March Business Plan as the Company's operations may change under
the Company's post-Merger ownership and capital structure.
Notwithstanding the foregoing, in light of the allegations in
the Goodwin litigation, the Company is making the March Business
Plan publicly available. The results forecast in the March
Business Plan are not reflective of the Company's prospects due to
the passage of time and the absence of a recapitalization plan
providing the financing on which the Plan was based. (The time
during which the Company could have accepted the Canyon Proposal
has passed.)
Forward Looking Statements
The March Business Plan was a forward looking statement within
the meaning of the Private Securities Litigation Reform Act of
1995. The March Business Plan incorporated the belief and
expectations of Company management in March 1997 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. Company stockholders
are cautioned that any such forward looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may differ materially from
those in the forward looking statements as a result of various
factors.
Realization of the March Business Plan would also have been
subject to a number of other material uncertainties and risks, some
of which are more fully set forth in the section of this
Supplemental Disclosure entitled "Risk Factors."
LIVE ENTERTAINMENT INC.
MARCH BUSINESS PLAN FOR 1997-1999
General Assumptions
The following information is presented to provide an outline
of the major assumptions used in preparing the March Business Plan.
Such assumptions were based upon historical experience of the
Company and anticipated future events. The March Business Plan
represented management's best estimate of future results in March
1997, but estimates are by their nature uncertain and subject to
factors beyond the Company's control. The Company's independent
auditors did not examine, compile or apply agreed-upon procedures
to the March Business Plan and, accordingly, accept no
responsibility for it.
Recapitalization
- - This financial model assumed that in March 1997 a
recapitalization would be effected whereby the Company would
receive the following infusion of capital:
- $50 million in new seven year, 12% subordinated
debentures, interest payable quarterly.
- A $50 million working capital facility increasing to a
$70 million facility in 1999.
The March Business Plan assumed that the new infusion of
capital would revise the Company's capital structure by:
- Retiring the Increasing Rate Notes.
- Redeeming for cash and Common Stock the existing Series
B Preferred Stock and Series C Preferred Stock.
Revenues and Costs of Sales
- - The 1997 to 1999 fiscal year estimated revenues and related
costs of sales were based on specific title-by-title analysis
of the indicated number of releases as follows:
1997 1998 1999
Theatrical 8 6 9
Direct to Video 19 11 17
- - In accordance with the Company's business strategy, film
rights other than those for domestic home video would be
acquired. As a result, certain theatrical, international and
television rights were reflected in the revenue and costs
assumptions. In general, revenues would be recognized when
the films were 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 were
amortized against video, theatrical, television and
international revenues. All such costs were amortized in full
over the periods the revenues were recognized in accordance
with the film forecast method of FAS #53.
- - Video revenue return reserves were based on the following
percentages:
Rental New Release 8.0%
Sell-thru New Release 20.0%
Sell-thru Seasonal Product 30.0%
Sell-thru Special Interest 23.0%
Sell-thru Catalog 20.0%
Avid (low price product line) 22.5%
Operating Expenses
- - Estimated operating expenses for 1997 were determined on a
department-by-department basis. The expenses for 1997 include
an increase of approximately $1,100,000 over 1996 amounts
related to the addition of an in-house sales staff for a full
year (to replace the sales staff of WEA) and an increase of
approximately $2,000,000 related to the establishment of the
Company's in-house theatrical distribution staff. Operating
expenses in 1998 and 1999 reflect a 5% increase over the prior
year operating expenses.
Income Taxes
- - 1997-1999 income taxes were calculated at rates approximating
15% and were based on net income before taxes. This was a
higher rate than in the past due to the Company's utilization
of its Alternative Minimum Tax net operating losses.
Interest Expense
- - Estimated interest expense was based upon the average monthly
credit line balances assuming an interest rate of Prime+2%.
The interest rate projected for the new working credit
facility for 1997, 1998 and 1999 was 10%.
- - Interest expense related to production financing would be
capitalized and amortized; however, for purposes of the March
Business Plan, all interest was assumed expensed immediately.
- - Loan costs and fees in the amount of $4.5 million related to
the recapitalization would be paid in March 1997 and amortized
on a straight-line basis over a three-year period.
Film Right Payments
- - It was the Company's goal to acquire future films and rights
without making advance payments and to pay 100% upon delivery;
however the March Business Plan assumes the Company would be
able to defer payment of 70% of the cost of projected releases
until delivery. To project this impact the Company assumed
that 30% of all acquisitions would be paid on execution and
the remaining 70% would be paid on delivery. The forecasts
for 1997 and 1998 assumed that two productions in each year
would be financed through co-production arrangements pursuant
to which the Company would fund approximately 40% of the
production budgets.
Distribution
- - The March Business Plan assumed continuation of the current
agreement with WEA in a reduced form. Beginning in 1997 it
was assumed that the Company would bring the sales function
in-house and the fulfillment and billing/collection functions
would remain at WEA. Therefore, the current fee to WEA would
be reduced by at least 2%.
Cash Receipts
- - Collections on sales were generally forecasted to be as
follows:
Video Month following sale
Theatrical Five to eight months following release
Television Month of availability
International Projected based upon assumed
availability in various territories
Cash Disbursements
- - Video duplication and marketing costs were forecasted to be
paid in the quarter in which the related revenue was
recognized. Agency fees were forecasted to be paid in the
month following the sale from which the fees were earned.
- - Theatrical, television and international costs were forecasted
to be paid in the quarter in which the related revenues were
recognized.
- - Video rights acquisition costs were forecasted to be paid two
quarters prior to video release.
- - Residuals and participations were forecasted to be paid in the
month following the sale from which they were earned.
- - Operating expenses, interest on the current credit facility
and taxes were forecasted to be paid during the period in
which they would be expensed. Interest would be paid on the
Increasing Rate Notes until their anticipated repayment in
March 1997. Interest was assumed to be paid quarterly on $50
million of new notes and monthly on a new credit facility.
March Business Plan Financial Forecasts ($000)
1997 Plan 1998 Plan 1999 Plan
$ % $ % $ %
REVENUES (net): $173,040 100% $243,318 100% $293,945 100%
COST OF SALES 87,247 50.4% 108,406 44.6% 139,521 47.5%
FILM RIGHT AMORTIZATION 47,942 27.7% 78,051 32.0% 87,525 29.8%
Gross Profit 37,851 21.9% 56,861 23.4% 66,899 22.7%
OPERATING EXPENSES 21,147 12.2% 23,858 9.8% 25,023 8.5%
AMORTIZATION OF GOODWILL 3,924 2.3% 3,924 1.6% 3,924 1.3%
Income from Operations $12,780 7.4% $29,079 12.0% $37,952 12.9%
Net Income $5,381 3.1% $16,041 6.6% $21,853 7.4%
EBITDA $16,704 9.7% $33,033 13.6% $41,876 14.2%
DILUTION ARGUMENT
In addition, the Goodwin complaint alleged that the references
to dilution in the Canyon Proposal described in the June 16, 1997
Proxy are misleading. The complaint asserts that: (i) the diluted
interests of the unaffiliated Common stockholders in a post-
recapitalization Company should be valued at more than $6.00 per
share, and (ii) it is misleading to state that the holders of
Common Stock other than Pioneer hold approximately 1,811,000 of
2,452,000 outstanding Common shares (74%) when they are receiving
"around 14% of the total consideration" in the Proposed Merger
(including the amounts required to retire the Series B and Series
C Preferred Stock). Therefore, according to the complaint, it was
inappropriate to show in a dilution chart that the Canyon Proposal
could have reduced the interests of the unaffiliated Common
Stockholders from 74% to between 8.6% to 19.5%, depending upon
acceptance of the Canyon Proposal by the holders of the Series B
Preferred Stock, as the Common Stockholders only "owned" 14% of the
Company in any event.
Plaintiff's first point is based on a "valuation" of the
Company created by the plaintiff out of forecasts included in the
Company's 1996 Schedule 13E-4 filing (which filing was never
completed or distributed by the Company), and which forecasts were
no longer accurate by the end of 1996. When the Company negotiated
the Canyon Proposal in 1997, it used an indicated value of $4.50
per share for the Company's Common Stock to determine exchange
ratios for the Company's Series B Preferred Stock. The Company did
not believe that it could have supported a higher value for the
Common Stock based on the Company's prospects and need for capital
at that time. Thus, the Company does not agree that the value of
the Company's Common Stock would have been in excess of $6.00 per
share after implementation of the Canyon Proposal, and as noted
above, the Canyon Proposal was not likely to have been accepted by
the holders of the Company's Series B Preferred Stock given the
alternative of the Merger Proposal, and therefore could not occur
in any event.
The Company also disagrees with the Plaintiff's second point
regarding the ownership of the Company's future growth. Absent a
recapitalization and exchange offer, neither the Increasing Rate
Notes nor the Series B or C Preferred Stock could in early 1997
participate meaningfully in the future growth of the Company's
equity. The Increasing Rate Notes were not convertible, the Series
B Preferred Stock was convertible at $15.00 per share through July
1997, and the Series C Preferred Stock was and is convertible at
$15.225 per share. Thus, any growth in the Company's value before
a recapitalization would have inured to the primary benefit of the
Company's Common stockholders. The Company's financial situation
was such that in 1997 the only recapitalization plan available, the
Canyon Proposal, would have reduced the interests of the Common
Stockholders to the levels indicated (between 8.6% to 19.5%), while
still leaving the Company with between $25 and $50 million of new
subordinated debt, as well as additional bank debt. This meant that
under the only then available recapitalization plan, any future
growth of the Company's equity value would be enjoyed predominantly
by the former holders of the Company's other securities and only to
a lesser extent by the current holders of the Common Stock.
RISK FACTORS
Holders of Common Stock should consider the risk factors set
forth below which pertain to any valuation of the Company's
business and which are excerpted, in part, from the Company's 1996
Form 10K and August 1996 Schedule 13E-4, as well as the other
information set forth in this Supplemental Disclosure, prior to
determining whether to exercise Appraisal Rights.
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.
Shift in Strategy
During the past few years the Company has found it
increasingly difficult to acquire 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., the Company's 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 feature films on economically rational terms,
the Company has become involved in film production and the
acquisition of film product with multiple rights. This involvement
has led the Company into an area of the business where it has
limited experience and 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.
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.
The commercial success of a theatrical motion picture also depends
upon the quality and acceptance of other competing films released
into the marketplace at or near the same time, the availability of
alternative forms of entertainment and leisure time activities,
general economic conditions and other tangible and intangible
factors, all of which can change and cannot be predicted with
certainty. Success 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 differ substantially from
that which was initially envisioned.
Theatrical Distribution.
In 1997, the Company began to distribute its own motion
picture releases in the United States theatrical market. The
Company's motion pictures will face significant competition from
films produced and distributed by others without the benefit of an
experienced distributor or proven distribution network. Theatrical
distribution will require an increase in overhead and the
commitment of additional capital resources by the Company. The
theatrical distribution of motion pictures represents a new line of
business for the Company and, accordingly, no assurances can be
given that its distribution efforts will be successful.
Ability to Achieve Production Goals.
Although the Company's primary strategic objective is to
produce and arrange for the release of up to 9 motion pictures per
year by 1999, no assurances can be given that such production and
release goals will be met in future periods. Factors which may
affect the Company's ability to produce and release films in the
future include availability of satisfactory scripts, creative
personnel or production facilities, all of which may be adversely
affected by competition from larger and better financed motion
picture companies. If the Company's production goals are not met,
the Company's future profitability may be correspondingly reduced.
Competition and Rapid Technological Change.
Motion picture production and distribution are highly
competitive businesses with competition coming both from companies
within the motion picture industry and companies in other
entertainment media. Many of these competitors have significantly
greater financial and other resources than the Company. The
entertainment industry in general, and the motion picture industry
in particular, are continuing to undergo significant changes,
primarily due to technological developments. Although these
developments have resulted in the availability of alternative and
competing forms of leisure time entertainment, including pay/cable
television services and home entertainment equipment such as video
cassettes, video games and computers, such technological
developments have also resulted in the creation of additional
revenue sources through the licensing of rights with respect to
such new media, and potentially could lead to future reductions in
the costs of producing and distributing motion pictures.
Regardless of the technology employed, the theatrical success of a
motion picture remains a crucial factor in generating revenues in
other media. Due to the rapid growth of technology, shifting
consumer tastes, and the popularity and availability of other forms
of entertainment, it is impossible to predict the overall effect
these factors will have on the potential revenue from and
profitability of feature-length motion pictures.
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. Success in the home video market
is largely dependent upon 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 video cassettes. The Company's competitors for
product acquisitions are video companies such as New Line Home
Video, Hallmark Entertainment Group, HBO and Trimark Holdings Inc.,
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.
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 be able to generate sufficient cash from its
productions or continue to have adequate financing available to it
in the future.
Financial Condition of the Company and Working Capital Needs
The operations of the Company in general, and its new motion
picture production and distribution activities in particular,
require significant additional working capital. The production and
distribution of theatrical motion pictures, an aspect of the
entertainment industry in which the Company 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.
The Company's existing credit facility matures in 1998 and the
Increasing Rate 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 a sale or
rationalization and receipt of new financing, the Company may not
have the capital resources necessary to replace the existing credit
facility or to pay the Increasing Rate Notes when due. Similarly,
if the Company were required to devote all its capital resources to
pay the obligations of the Increasing Rate Notes in 1998 and 1999,
it would not have sufficient capital available to meet its business
needs. In addition, to conserve capital the Company would consider
no longer paying cash dividends on the Series B Preferred Stock.
This could result in substantial dilution to the holders of the
Company's Common Stock as the conversion price of the Series B
Preferred Stock will reset in such event.
APPRAISAL RIGHTS
Delaware General Corporation Law Section 262 provides record
holders of Common Stock on the effective date of the Merger with
the opportunity (an "Appraisal Right") to dissent from the Merger
and to seek an appraisal of and to be paid the fair cash value
(exclusive of any element of value arising from the accomplishment
or expectation of the Merger) for his or her shares of Common
Stock.
As part of the settlement of the Goodwin litigation, the
Company has agreed to allow record holders of Common Stock on the
effective date of the Merger who wish to exercise their Appraisal
Rights to do so for a period of up to four weeks after the Merger,
ending at 5:00 p.m., Eastern Daylight Time, on Friday, August 8,
1997, by delivering to Geraldine Zarbo at American Stock Transfer
& Trust Company, 6201 15th Avenue, Brooklyn, NY, 11219, or by
telecopy to the attention of Geraldine Zarbo at (718) 921-8335, a
Notice of Election of Appraisal Rights in the form attached to this
Supplemental Disclosure. Such record holders on the effective date
of the Merger will be able to exercise their appraisal rights
regardless of whether they voted in favor of the Merger Proposal.
Holders of Common Stock who so exercise their Appraisal Rights
should not return their shares of Common Stock and Letters of
Transmittal mailed to them concurrently herewith. Such holders
will not receive the $6.00 per share Common Stock Merger Price.
Instead, all holders who so exercise their Appraisal Rights will
receive the consideration determined in the Appraisal process in
accordance with Delaware law as more fully described in the June
16, 1997 Proxy. This consideration may be greater or lesser than
the Common Stock Merger Price.
Any stockholder who returns his or her Letters of Transmittal
and shares of Common Stock to the Exchange Agent will be deemed to
have waived and foregone any request for Appraisal Rights he or she
may have made on or prior to August 8, 1997.
<PAGE>
NOTICE OF ELECTION OF APPRAISAL RIGHTS
In connection with the Merger
of a subsidiary of
Film Holdings Co.
with and into
LIVE Entertainment Inc.
For information call: (818) 778-3167
This Notice of Election of Appraisal Rights should be read carefully
before being completed. If certificates are registered in different names,
a separate Notice of Election of Appraisal Rights must be submitted for each
different registered owner.
The undersigned, a record holder of Common Stock of LIVE Entertainment
Inc. (the "Company") on the effective date of the Merger hereby notifies the
Company of the undersigned's intention to exercise appraisal rights pursuant
to Delaware General Corporation Law Section 262 as more fully described in
the Proxy dated June 16, 1997 and the Supplemental Disclosure dated July 9,
1997. The undersigned certifies to the Company that the undersigned has not
submitted the below-referenced certificates to the Exchange Agent pursuant to
the Letter of Transmittal.
DESCRIPTION OF CERTIFICATES
Name(s) and Address(es) of Record Owner(s) Certificate(s)
(Please fill in, if blank) (Attach additional list
if necessary)
Certificate Total Number of
Number(s) Shares
Represented by
Certificate(s)
Total Shares
Must be signed by record holder(s) exactly as name(s) appear on the
Certificate(s) or by persons authorized to become record holders by documents
transmitted herewith (a "Record Holder"). If signature is by an attorney-in-
fact, trustee, executor, administrator, guardian, officer of a corporation or
others acting in a fiduciary or representative capacity, please set forth
full title.
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dated. . . . . . . . . . Name(s) . . . . . . . . . . . . . . . . . .
(Please Print)
Capacity (Full Title). . . . . . . . . . . . . . . . . . . . . . . . .
Address. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Include Zip Code) . . . . . . . . . . . . . . . . . . . . . . . . . .
Record holders of Common Stock who wish to exercise their Appraisal Rights
must send the above form, fully-executed, to Geraldine Zarbo at American
Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, NY, 11219, or by
telecopy to the attention of Geraldine Zarbo at (718) 921-8335, to be
received no later than 5:00 p.m., Eastern Daylight Time, on Friday,
August 8, 1997.
DO NOT ENCLOSE YOUR STOCK CERTIFICATES WITH THIS FORM.
Exhibit 19.2
July 9, 1997
To Our Clients Holding Common Stock Of LIVE Entertainment Inc.
Re: Merger of LIVE Entertainment Inc
Dear Clients:
LIVE Entertainment Inc., a Delaware corporation (the
"Company"), has completed a merger with Film Acquisition Co., upon
the terms previously announced in the Proxy Statement dated June
16, 1997 (the "June 16, 1997 Proxy") whereby each share of Series B
Cumulative Convertible Preferred Stock, par value $1.00 per share
(the "Series B Preferred Stock") will receive the Series B Merger
Price ($10.00 per share plus accrued dividends) and each share of
Common Stock, par value $0.01 share (the "Common Stock") will
receive either (i) the Common Stock Merger Price ($6.00 per share)
or (ii) the opportunity to elect Appraisal Rights as set forth in
the June 16, 1997 Proxy and the Supplemental Disclosure - Extension
of Appraisal Rights, subject to the conditions set forth therein.
Enclosed for your consideration are the following documents:
ARTICLE 1. Waiver or Election of Appraisal Rights.
ARTICLE 2. Supplemental Disclosure - Extension of Appraisal Rights.
ARTICLE 3. Notice of Merger.
ARTICLE 4. Letters of Transmittal (for your information only -- for
use only by record holders).
ARTICLE 5. A return envelope addressed to us.
These materials are being forwarded to you as the beneficial
owner of Common Stock carried by us in your account but not
registered in your name. An election to elect or waive Appraisal
Rights may only be made by us as the Record Holder and pursuant to
your instructions. Therefore, the Company urges holders of Common
Stock registered in the name of a broker, dealer commercial bank,
trust company or other nominee to contact such institution promptly
if they wish to accept or waive Appraisal Rights.
Accordingly, we request instructions as to whether you wish us
to elect or waive Appraisal Rights for any Common Stock held by us
for your account in accordance with the terms of the Supplemental
Disclosure - Extension of Appraisal Rights and the June 16, 1997
Proxy.
Your instructions to us should be forwarded to us as promptly
as possible (and by August 8, 1997) in order to permit us to elect
or waive Appraisal Rights in accordance with the provisions of the
Supplemental Disclosure - Extension of Appraisal Rights and the
June 16, 1997 Proxy. All holders who elect Appraisal Rights will
receive the consideration determined in the Appraisal process in
accordance with Delaware law as more fully described in the June
16, 1997 Proxy. This consideration may be greater or lesser than
the Common Stock Merger Price promptly after August 8, 1997. If no
election is made, you will automatically receive the Common Stock
Merger Price, $6.00 per share of Common Stock. If you wish to
receive the Common Stock Merger Price prior to August 8, 1997,
please indicate on the Waiver or Election of Appraisal Rights form
that you wish to waive Appraisal Rights and return such form to us
as soon as possible.
The accompanying Letters of Transmittal are furnished for your
information only (unless you are a holder or record and have
physical possession of your stock certificates) and may not be used
by you to deliver Common Stock held by us for your account.
<PAGE>
WAIVER OR ELECTION OF APPRAISAL RIGHTS
Please return this Form to us in the enclosed envelope.
The undersigned acknowledge(s) receipt of your letter and the
enclosed material referred to therein relating to the Merger of
LIVE Entertainment Inc. with Film Acquisition Co. and the Notice of
Election of Waiver of Appraisal Rights by holders of Common Stock
of the Company.
[ ] Waiver -- Please submit the Letters of Transmittal acting as
a waiver of appraisal rights on my behalf for the Common Stock
held by you for my account. I have identified below the
number of shares of Common Stock for which a waiver is made if
I wish to so waive appraisal rights with respect to less than
all my Common Stock.
[ ] Election -- Please submit the Notice of Election of Appraisal
Rights on my behalf for the Common Stock held by you for my
account. I have identified below the number of shares of the
Common Stock for which an Election is made if I wish to elect
Appraisal Rights with respect to less than all my Common
Stock. I understand that by electing Appraisal Rights I will
not receive the Common Stock Merger Price on or before August
8, 1997 and will have to complete the Appraisal process as
described in the June 16, 1997 Proxy and the Supplemental
Disclosure - Extension of Appraisal Rights.
If your choice above relates to less than all of your Common
Stock, please so indicate as to how many shares the election
relates [_________________].
______________________________
______________________________
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 WAIVE YOUR APPRAISAL RIGHTS TO ALL OF YOUR COMMON STOCK.
