<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended JUNE 30, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number: 0-18613
TRIMARK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4272695
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2644 30TH STREET
SANTA MONICA, CALIFORNIA 90405
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(310) 314-2000
Securities registered pursuant to Section 12(b) of the Act:
(NONE)
Name of each exchange on which registered: (NONE)
Securities registered pursuant to Section 12(g) of the Act:
Title of Class:
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of September 15, 1997, the aggregate market value of Common Stock held by
non-affiliates of the registrant was approximately $6,499,524. All officers,
directors and more than ten percent (10%) shareholders of the registrant are
deemed "affiliates" of the registrant solely for the purpose of calculating such
aggregate market value.
The number of shares of Common Stock of the registrant outstanding as of
September 15, 1997 was 4,182,627, excluding shares held by the registrant as
treasury stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement (the "1997 Proxy
Statement") to be filed pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year (June 30, 1997) are incorporated by reference in Part
III.
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PART I
ITEM 1. BUSINESS
GENERAL
Trimark Holdings, Inc., a Delaware corporation (the "Company"), through its
wholly-owned subsidiary, Trimark Pictures, Inc., a California corporation
("Trimark"), is a worldwide distributor of entertainment software, primarily
engaged in the distribution of feature films in the domestic home video and
theatrical markets and in the licensing of distribution rights to motion
pictures for international markets. Trimark Television, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company, licenses television
rights to feature films, television series, music and children specials, and
documentaries in both the international and domestic markets.
As an independent distribution company, the Company acquires the rights to
motion pictures from a variety of sources, including studios, production
companies and independent producers. Generally, the Company 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 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. The
Company distinguishes itself from the major motion picture studios and certain
other independent video distribution companies by acquiring rights to motion
pictures which may not be cost effective for many of its larger competitors to
distribute.
Distribution rights which the Company may acquire include: (a) DOMESTIC - home
video, - free television, - pay television (including cable and pay-per-view), -
theatrical and - electronic publishing (b) INTERNATIONAL - all media.
The Company was formed in August 1984 and began operations as a domestic home
video distributor in early calendar year 1985 by acquiring exclusive home video
distribution rights to motion pictures and other audio-visual entertainment
programs which it packaged, advertised, promoted, sold, had duplicated, and
shipped to home video wholesalers for resale to retailers throughout the
country. The Company generally sells videocassettes to wholesale distributors
for resale to the approximately 27,500 video rental stores in the United States.
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ITEM 1. (Continued)
In 1987, the Company began distributing and sublicensing motion pictures for
distribution in the international market. The Company considered this an
opportunity to grow in an area closely related to its video business, while
offering new opportunities to acquire broader distribution rights to motion
pictures in all media.
On May 15, 1990, the Company was re-incorporated in Delaware. The principal
assets of the Company are the capital stock of Trimark Pictures and Trimark
Television; the material business of the Company is conducted through these
companies. Unless noted otherwise, all references to the Company in this filing
include its subsidiaries.
On June 29, 1990, the Company effected an initial public offering of 1,300,000
shares of Common Stock and an additional 200,000 shares of Common Stock were
sold by selling stockholders.
On December 31, 1991, the Company acquired Trimark Television (which at the time
was named International Broadcast Systems, Ltd.) a publicly traded company, for
$1.6 million in cash. Trimark Television specializes in the distribution of
television programming, and licenses television productions to broadcasters
throughout the world.
On June 1, 1992, the Company changed its name from Vidmark, Inc. to Trimark
Holdings, Inc. On June 24, 1992, Trimark changed its name from Vidmark, Inc. to
Trimark Pictures, Inc. The name changes reflect the Company's diversification
of its distribution streams.
In March of 1993, the Company formed Trimark Interactive to expand the core
business of film production and video distribution into the emerging market for
interactive entertainment software and multimedia. In March 1997, the Company
sold substantially all assets (primarily intellectual properties and inventory)
of Trimark Interactive to an unrelated independent entertainment and interactive
music publisher. The Company is no longer engaged in the market for interactive
entertainment software and multimedia.
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ITEM 1. (Continued)
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 Brothers (including Turner Pictures, New Line Cinema and
Castlerock Entertainment), Twentieth Century Fox, Sony Pictures Entertainment
(including Columbia Pictures and Tristar Pictures), Paramount Pictures, The Walt
Disney Company (including Buena Vista, Touchstone and Miramax) and MGM
(including Metro Goldwyn Mayer Pictures, United Artists Pictures, Orion Pictures
and Goldwyn Entertainment Company), which historically have produced and
distributed the majority of theatrical motion pictures released annually in the
United States. In recent years, however, "independent" motion picture
production companies have played an important role in the production of motion
pictures for the worldwide feature film market. There are also a large number
of smaller production companies such as the Company and other entities that
produce theatrical motion pictures.
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 approximately $10 million to $100
million or more, and provide a continual source of motion pictures to the
nation's theatrical 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 Production and Financing. The production of a motion picture
begins with the screenplay adaptation of a popular novel or other literary work
acquired by the producer or the development of an original screenplay having its
genesis in a story line or scenario conceived of or acquired by the producer.
In the development phase, the producer typically seeks production financing and
tentative commitments from a director, the principal cast members and other
creative personnel. A proposed production schedule and budget also are prepared
during this phase.
Upon completing the screenplay and arranging financing commitments, pre-
production of the motion picture begins. In
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ITEM 1. (Continued)
this phase, the producer engages creative personnel to the extent not previously
committed; finalizes the filming schedule and production budget; obtains
insurance and secures completion guarantees, if necessary or available;
establishes filming locations and secures any necessary studio facilities and
stages; and prepares for the start of principal photography.
Principal photography, the actual filming of the screenplay, may extend from
four to twelve weeks or longer, depending upon such factors as budget, location,
weather and complications inherent in the screenplay. Following completion of
principal photography, the motion picture is edited, opticals, dialogue, music
and any special effects are added, and voice, effects and music sound tracks and
picture are synchronized during post-production. This results in the production
of the negative from which the release prints of the motion picture are made.
The cost of a motion picture produced by an independent production company for
limited distribution ranges from approximately $1 million to $12 million as
compared with an average of approximately $40 million for commercial films
produced by major studios for wide release. 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.
The major studios generally fund production costs from cash flow from their
motion picture and related activities, licensing fees generated from film
library holdings, and, in some cases, from unrelated businesses. Substantial
overhead costs, consisting largely of salaries and related costs of the
development, production, distribution and marketing staff and physical
facilities maintained by the major studios, also must be funded.
Independent production companies generally avoid incurring substantial overhead
costs 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 bank loans,
"pre-sales" agreements, equity offerings and joint ventures. Independents
generally attempt to complete their financing of a motion picture production
prior to
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ITEM 1. (Continued)
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 license 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, international or other ancillary markets. Producers with
distribution capabilities may retain the right to distribute the completed
motion picture either domestically or in one or more foreign markets. Producers
may separately license theatrical, home video, television, foreign and all other
distribution rights among several licensees.
Both major studios and independent film companies often acquire motion pictures
for distribution through a customary 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 or 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 of the motion picture.
Both major studios and independent film companies generally incur various third-
party participations in connection with the production and distribution 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.
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ITEM 1. (Continued)
MOTION PICTURE DISTRIBUTION.
Motion picture distribution encompasses the distribution of motion pictures in
theaters and in ancillary markets such as home video, pay-per-view, pay
television, broadcast television, foreign and other markets. The distributor
typically acquires rights from the producer to distribute a motion picture in
one or more markets. For its distribution rights, the distributor typically
agrees to advance the producer a certain minimum royalty or guarantee, which is
to be recouped by the distributor out of revenues generated from the
distribution of the motion picture and is generally nonrefundable. The producer
also is entitled to receive a royalty equal to an agreed-upon percentage of all
revenues received from distribution of the motion picture over and above the
royalty advance.
Theatrical Distribution. The theatrical distribution of a motion picture
involves the manufacture and transportation 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 major studios can spend in
excess of $50 million to promote motion pictures, and have average combined
print and advertising costs in excess of $19 million. 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 and the competition among distributors for theaters during certain
seasons. Similarly, the ability to exhibit motion pictures in the most popular
theaters 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.
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ITEM 1. (Continued)
Motion pictures may continue to play in theaters for up to four (4) months or
longer 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. Motion pictures are generally
made available for distribution in markets subsequent to theatrical as follows:
<TABLE>
<CAPTION>
Months After Approximate
Initial Release Release Period
--------------- --------------
<S> <C> <C>
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 or 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 3-12 years
</TABLE>
Home Video. The home video distribution business involves the promotion and
sale of videocassettes and videodiscs to 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.
To address the continuing competition in the domestic home video market, the
Company has focused its resources on distributing an increased number of films
theatrically (both mainstream and specialized) and decreasing the releases of
straight-to-video films. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
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 to encourage direct purchase by
consumers. Direct sale to consumers is referred to as the "priced-for-sale" or
"sell-thru" market.
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ITEM 1. (Continued)
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 specifically serve the rental market has remained essentially flat
for the past several years, while the number of outlets which offer
videocassettes and videodiscs for sale has increased. The sell-thru market
continues to grow with strong sales in the traditional family entertainment
market and a growing number of hit feature films initially released at prices
generally below $30. Furthermore, technological developments which regional
telephone companies and others are developing could make competing delivery
systems economically viable and could affect the home video marketplace.
Pay-per-view. Pay-per-view television allows cable and satellite 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 subscribers to view premium channels such
as HBO/Cinemax, Showtime/The Movie Channel and other pay television networks
offered by cable and satellite system operators for a monthly subscription fee.
The pay television networks acquire a substantial portion of their programming
from motion picture distributors. New markets may develop with the maturation
of newly emerging direct broadcast satellite (DBS) systems and other digital
television systems.
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), recently formed networks (UPN and WB
Network), 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
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ITEM 1. (Continued)
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, and increased
home video and 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 licensing rights to manufacture and distribute merchandise,
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 impact of emerging
technologies such as digital video discs, direct broadcast satellites and the
internet, on the Company's operations cannot be determined at this time.
However, as a holder of entertainment copyrights, the Company monitors 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)
and various markets or territories (e.g., the United States and Canada, Great
Britain, Japan). The Company prefers to acquire worldwide distribution rights
to a motion picture in all media wherever feasible.
The Company uses a similar decision making process in analyzing the acquisition
of a completed or an uncompleted movie. 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. 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 with risks that, in management's opinion, could materially adversely
affect the Company's profitability. The
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ITEM 1. (Continued)
Company's credit facility imposes limitations on the size of minimum guarantees
or production or acquisition costs the Company can incur without the lender's
approval. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations --Liquidity and Capital Resources."
When the Company acquires distribution rights to a motion picture prior to its
production, it makes 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 production
elements and maintains a production supervisory staff to monitor the production
process. The Company's current policy is to acquire distribution rights for
motion pictures which will not be subject to material restrictions on release
and exhibition.
Domestic Home Video Distribution Rights. The Company generally acquires
domestic (United States and Canadian) home video rights under exclusive
licenses, for terms ranging from five years to perpetuity, in return for a
minimum guarantee against future royalties based on a percentage of a
videocassette's wholesale net revenues. The value of a motion picture's
domestic home video rights generally increases as its domestic theatrical print
and advertising budget increases. Some of the Company's licenses require the
licensor or theatrical distributor to make minimum print and advertising
expenditures. In other instances, the Company has agreed to release and or pay
print and advertising expenses for a motion picture's theatrical distribution.
Domestic home video sales are promoted through regional direct sales personnel
who contact home video wholesale distributors and large retail video stores.
Substantially all of the Company's home video sales have been made to ten (10)
wholesale video distributors and two (2) retail video stores.
In February 1994, the Company formed a sell-thru unit to maximize the profit
potential of its library and acquire new products for the growing video sell-
thru market.
Domestic Theatrical Distribution Rights. The Company acquires theatrical
distribution rights and on a selective basis and distributes motion pictures for
exhibition by both major theater chains and numerous independent theaters
throughout the United States.
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ITEM 1. (Continued)
Management of the Company considers the theatrical distribution of film
important as a marketing tool which enhances video and international sales.
Accordingly, the Company seeks to acquire theatrical distribution rights as part
of an acquisition where possible, even if a film ultimately will not be released
theatrically. The Company released theatrically five films during fiscal 1997.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company either targets motion pictures for distribution on a
wide release, mainstream basis, which can result in substantial amounts being
expended for the costs of national advertising and the manufacturing of initial
release prints, or targeted, in the case of specialized films, to various
demographic audiences, as opposed to the mainstream public, and such pictures
would be distributed on a more regional, less expensive, basis. Specialized
motion pictures are characterized by underlying literary and artistic elements
intended to appeal primarily to sophisticated or niche audiences and are
generally substantially less expensive to produce and distribute than films
produced for wide release. It is not uncommon for heavily advertised films to
suffer theatrical losses but to have increased performance in video and other
ancillary media that may partially or totally offset such losses. The
management of the Company believes that the theatrical market has significant
upside potential should any particular film perform well. However, no assurance
can be made as to results with respect to any particular release.
The Company is in various stages of post production, production, development and
pre-production on a number of projects, and intends to release theatrically six
(6) to eight (8) films in fiscal 1998. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Domestic Television Distribution Rights. The Company acquires television
distribution rights as part of the overall acquisition whenever possible. In
addition, television distribution rights are acquired specifically for
distribution by Trimark Television.
The Company intends to hire additional personnel to develop and oversee the
production and sales of long-form programming for initial release on network or
major cable.
Television networks, independent television networks, television stations and
cable system operators generally license television series, films and film
packages (consisting of theatrically
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ITEM 1. (Continued)
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.
Pay/Cable television services usually license pictures for initial exhibition
commencing approximately 10 to 18 months after initial domestic theatrical
release or six months after domestic home video release. Licensing of such
properties is generally accomplished pursuant to agreements which allow a fixed
number of telecasts over a prescribed period of time for a specified license
fee.
International Distribution Rights. International distribution rights include
rights in various media (e.g., television, theatrical and home video) and to
various territories (e.g., Germany, Italy, Japan and the United Kingdom). To
acquire these rights, the Company is usually 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. The Company maintains a
sales force to manage international sales and to promote its motion pictures at
film markets, including the Cannes Film Festival in France, the American Film
Market (AFM) in Los Angeles and The Milan Film Festival (MIFED) in Italy.
MARKETING AND SELLING
The Company's marketing operations are focused on domestic home video,
international licensing, theatrical distribution and television distribution.
The Company designs its own promotional campaigns for each motion picture;
commissions the art work for advertising, trade show displays and packaging; and
arranges for the printing, production and distribution of all promotional
materials.
Domestic home video sales are promoted through regional direct sales personnel
who contact home video wholesale distributors and large retail video stores.
The Company's largest wholesale video customer is Ingram Entertainment which
represents approximately twelve percent (12%) of net revenues for the fiscal
year ended June 30, 1997.
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ITEM 1. (Continued)
The Company, when appropriate, test markets its motion pictures in the domestic
theatrical market. If the response is satisfactory, the Company will proceed to
distribute the picture. The Company handles the sales, marketing and servicing
of its theatrical releases.
International sales operations consist of promoting and sublicensing the
Company's motion pictures to independent territorial distributors for release on
specified media within designated territories.
The Company maintains a sales force to manage international sales and to promote
its motion pictures at foreign film markets. The Company continues to expand
its worldwide television distribution in order to maximize the unexploited
television rights which it holds. The Company distributes product directly to
broadcasters in both the international and domestic markets and licenses product
for other companies and producers.
COMPETITION
The motion picture distribution business and other related entertainment
businesses are highly competitive. The Company's competitors in domestic home
video distribution have included the home video divisions of the major studios,
such as Warner Bros., The Walt Disney Company, Universal, Paramount, Fox and
Sony/Columbia; and independent distributors, including Live Entertainment and
Hallmark Entertainment. Many of these competitors have greater access to
feature films and significantly greater resources than the Company.
In the international distribution market, the Company competes with a wide range
of companies from small independents exclusively focused upon certain classes of
motion pictures like J & M Entertainment and Mark Damon Productions, to the
major studios which have expanded distribution in international territories,
such as Disney's Buena Vista International.
INTELLECTUAL PROPERTY RIGHTS
Copyright protection is a serious problem in the video cassette distribution
industry because of the ease with which cassettes may be duplicated. In the
past, certain countries permitted video pirating to such an extent that the
Company did not
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ITEM 1. (Continued)
consider these markets viable for distribution. Video distributors, including
the Company, have initiated legal actions to enforce copyright protection and
management believes the problem to be less critical at the present time.
In April 1997 the Company changed the trademark used in connection with all of
its domestic home video distribution from "VIDMARK" to "TRIMARK HOME VIDEO."
The Company is currently using the trademark "TRIMARK PICTURES" in connection
with films distributed domestically and licensed internationally and the
trademark "TRIMARK TELEVISION" in connection with licenses to free, pay and
cable television. The trademarks have been registered or are in the process of
registration with the Commissioner of Patents and Trademarks. The Company
regards its trademarks as valuable assets and believes that its trademarks are
an important factor in marketing its products.
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.
The Code and Ratings Administration of the Motion Picture Association of
America, an industry trade association, assigns ratings for age group
suitability for theatrical distribution of motion pictures. The Company submits
most of its films for such ratings. A substantial number of the Company's films
are rated "R;" under rules enforced by theatrical exhibitors, children under
certain ages may attend the applicable motion picture only if accompanied by an
adult.
In addition, United States television stations and networks as well as foreign
governments impose additional 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.
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ITEM 1. (Continued)
EMPLOYEES
As of June 30, 1997, the Company had 98 full-time employees, 40 of whom were
engaged in sales and marketing. None of the Company's employees are covered by
a collective bargaining agreement, although some of the Company's subsidiaries
are subject to guild agreements. Management believes that its employee
relations are good.
ITEM 2. PROPERTIES
The Company leases its corporate office space in Santa Monica, California for a
term of seven years expiring on April 30, 1999. These premises contain
approximately 26,000 square feet of office space. Management believes that
these facilities will be adequate for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to claims and suits arising from disputes over
copyrights, clear title and contractual matters arising from its distribution
contracts. Such proceedings are not considered material to the Company's
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable. No matters were submitted to a vote by the Company's security
holders during the fourth quarter of its fiscal year.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and all positions with the
Company currently held by each person who may be deemed an executive officer of
the Company. Executive officers serve at the discretion of the Board of
Directors. Except as otherwise indicated, each of the executive officers serves
in similar positions for both the Company and Trimark. Unless otherwise noted,
all references to the Company include Trimark.
-17-
<PAGE>
Item 4A. (Continued)
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mark Amin 47 Chairman of the Board and Chief Executive Officer
Johan A. Wassenaar 65 Vice Chairman of the Board and Secretary
Cami Winikoff 34 Executive Vice President and Chief
Administrative Officer of Trimark
Tim Swain 46 Executive Vice President of Trimark
Sergio Aguero 37 Executive Vice President of Trimark
James E. Keegan 39 Senior Vice President - Finance and Chief
Financial Officer
Don Gold 41 Senior Vice President of Trimark
</TABLE>
MARK AMIN is a founder of the Company and has served as its Chairman of the
Board since November 1988 and Chief Executive Officer since January 1994. Mr.
Amin served as a Director, President and Chief Executive Officer of the Company
from its incorporation in 1984 until December 1989. In 1981, Mr. Amin co-
founded 20/20 Video, a video specialty store in Los Angeles, California, and
served as a director of 20/20 Video from 1981 until 1988. Mr. Amin sold his
entire stock interest in 20/20 Video in 1987. Mr. Amin graduated from the
Graduate School of Management at the University of California at Los Angeles
with an MBA in marketing in 1975, and was previously awarded a BA degree in
economics by the University of Kansas.
JOHAN A. WASSENAAR is a founder of the Company and has served as a Director from
1984 and as its Vice Chairman since March 1990. Mr. Wassenaar previously served
as Chairman of the Board from August 1985 until November 1988. Mr. Wassenaar
has served as Secretary since 1984 and served as Chief Financial Officer from
August 1985 until March 1990. In 1970, he founded vanAar, Inc. of Santa
Barbara, California, a management consulting firm with expertise in high
technology business strategy, and serves as its President. Mr. Wassenaar
graduated with a BSc in engineering in 1953 from the University of the
Witwatersrand, Johannesburg, South Africa.
-18-
<PAGE>
Item 4A. (Continued)
CAMI WINIKOFF joined Trimark in August 1990, in November 1991 was appointed
Director of Production, in January 1995 was appointed Vice President of
Production, in January 1997 was appointed Senior Vice President and has served
as Executive Vice President, Chief Administrative Officer since September 1997.
Before joining Trimark Ms. Winikoff was an independent producer.
TIM SWAIN joined Trimark in February 1990 as Vice President of Domestic
Theatrical Distribution, in June 1992 was appointed Vice President of Domestic
Distribution, in April 1993 was appointed Senior Vice President of Domestic
Distribution and has served as Executive Vice President since April 1996. From
1984 to 1990, Mr. Swain was Vice President/General Sales Manager of New World
Pictures, Ltd., a diversified motion picture production and distribution company
located in Los Angeles, California. Mr. Swain served as Head of Western
Division for Film Ventures of Los Angeles from 1983 to 1984 and served as
Assistant General Sales Manager for The Jerry Gross Organization of Los Angeles
from 1981 to 1983.
SERGIO AGUERO joined Trimark in September 1991 as Vice President of
International Distribution, in September 1992 was appointed Senior Vice
President of International Distribution and has served as Executive Vice
President since April 1996. From 1989 to 1991, Mr. Aguero was Vice President of
International Sales at Vision International located in Los Angeles, California
and from 1988 to 1989 served as Vice President of International Sales at Epic
Pictures located in Los Angeles, California. Mr. Aguero graduated in 1982 from
Yale University with a combined BA in Economics and Political Science.
JAMES E. KEEGAN joined the Company in April 1989 as Controller, in March 1990
was appointed Vice President - Finance and Chief Financial Officer and has
served as Senior Vice President - Finance and Chief Financial Officer since
April 1993. From 1988 until 1989, Mr. Keegan was Controller of ITC Productions,
Inc., a theatrical and television production company based in Los Angeles,
California. From 1985 until 1988, Mr. Keegan was Controller of RCA/Columbia
Pictures Home Video, a video distribution company in Los Angeles. From 1984
until 1985, he was responsible for pay television and non-theatrical accounting
at Columbia Pictures in Los Angeles. Mr. Keegan graduated in 1980 from San
Diego State University with a BS in accounting and is a certified public
accountant (non-active).
-19-
<PAGE>
Item 4A. (Continued)
DON GOLD joined Trimark in January 1994 as Vice President of Sell-Thru
Distribution and in July 1996 was appointed Senior Vice President of Sales and
Marketing of Domestic Home Video. From 1991 to 1993, Mr. Gold was Vice
President of Strand Home Video. Prior to Strand, Mr. Gold held various sales
positions with Vestron Pictures. Mr. Gold graduated in 1981 from Cal State
Northridge with a degree in Political Science.
-20-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock began trading on the over-the-counter market on June
29, 1990 following the effectiveness of the Company's Registration Statement on
Form S-1. Prior to that date, there was no public market for the Common Stock.
The Common Stock is listed and reported on the National Association of
Securities Dealers Automated Quotation National Market ("NASDAQ/NNM") under the
symbol "TMRK." As of September 15, 1997, there were 4,182,627 shares of Common
Stock outstanding, excluding shares held by the Company as treasury stock, held
by approximately 51 shareholders of record.
The following table sets forth the high and low last sales prices as reported on
NASDAQ/NNM for fiscal 1996 and fiscal 1997.
<TABLE>
<CAPTION>
Sales Prices for Common Stock
-----------------------------
Quarter Ending High Low
- -------------- ---- ---
<S> <C> <C>
September 30, 1995 8 1/4 6 7/8
December 31, 1995 8 1/8 6 1/4
March 31, 1996 7 1/4 4 3/4
June 30, 1996 6 1/2 5 1/4
September 30, 1996 5 3/4 4 3/8
December 31, 1996 5 5/8 4 5/8
March 31, 1997 6 1/4 3 1/2
June 30, 1997 5 1/8 3 1/4
</TABLE>
The Company has not paid any cash dividends since its organization and has no
present intention to pay cash dividends in the foreseeable future. The present
policy of the Company is to retain its earnings to provide funds for the
operation and expansion of its business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected financial data for the Company and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and with Management's Discussion and Analysis of Financial
Condition and Results of Operations which appear elsewhere in this report.
-21-
<PAGE>
ITEM 6. (CONTINUED)
TRIMARK HOLDINGS, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
June 30,
-----------------------------------------------------
1997 1996 1995 1994 1993
------- --------- -------- --------- --------
(in thousands, except per share data)
Earnings Statement Data:
<S> <C> <C> <C> <C> <C>
Net revenues:
Domestic:
Home video $38,823 $34,615 $52,103 $61,994 $37,810
Theatrical 5,380 286 1,746 2,652 3,238
Television 4,824 5,063 7,861 3,019 3,832
International:
All media 12,791 17,668 21,812 14,660 15,698
Interactive:
All Media 1,347 2,200 1,472 -- --
-------------------------------------------------------
Net revenues 63,165 59,832 84,994 82,325 60,578
Film costs and
distribution expenses 53,421 57,495 70,721 68,339 44,264
-------------------------------------------------------
Gross profit 9,744 2,337 14,273 13,986 16,314
Operating expenses:
Selling 6,857 6,352 5,715 4,153 3,551
General and
administrative 4,239 5,447 5,873 5,049 5,137
Bad debt 321 31 276 587 995
-------------------------------------------------------
11,417 11,830 11,864 9,789 9,683
-------------------------------------------------------
Operating (loss)
earnings (1,673) (9,493) 2,409 4,197 6,631
Other (income) expenses:
Litigation settlement -- -- -- -- 1,200
Interest expense 1,934 847 1,230 320 39
Interest and
investment income (84) (95) (38) (73) (102)
Minority interest -- (38) (422) (135) (55)
-------------------------------------------------------
(Loss) earnings before
income taxes (3,523) (10,207) 1,639 4,085 5,549
Income taxes -- (2,380) 656 1,675 2,275
-------------------------------------------------------
Net (loss) earnings
before cumulative
effect of change in
accounting principle (3,523) (7,827) 983 2,410 3,274
-------------------------------------------------------
Cumulative effect of
change in accounting
for income taxes -- -- -- 100 --
-------------------------------------------------------
Net (loss) earnings ($ 3,523) ($ 7,827) $ 983 $ 2,510 $ 3,274
-------------------------------------------------------
</TABLE>
-22-
<PAGE>
ITEM 6. (CONTINUED)
<TABLE>
<CAPTION>
June 30,
-----------------------------------------------------
1997 1996 1995 1994 1993
------- --------- -------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net (loss) earnings per common share:
Net (loss) earnings
before cumulative
effect of change in
accounting principle ($0.84) ($1.83) $ 0.22 $ 0.53 $ 0.72
Cumulative effect of
change in accounting
for income taxes -- -- -- 0.02 --
------------------------------------------------------
Net (loss)earnings
per common share ($0.84) ($1.83) $ 0.22 $ 0.55 $ 0.72
------------------------------------------------------
BALANCE SHEET DATA:
Total assets $90,223 $48,401 $64,385 $62,281 $48,047
Total liabilities 70,014 24,051 31,775 30,262 18,585
Retained earnings 9,160 12,683 20,510 19,527 17,017
Stockholders' equity 20,209 24,350 32,572 31,909 29,317
</TABLE>
-23-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES: Net revenues for the year ended June 30, 1997 increased $3.3
- ------------
million, or 6%, compared with the prior fiscal year. The increase was primarily
attributable to increases in revenues generated from domestic theatrical and
home video partially offset by decreases in revenues generated from
international distribution. Net revenues decreased $25.2 million, or 30%, in
fiscal 1996 compared to fiscal 1995. The decrease was primarily attributable to
decreases in revenues generated from domestic home video and international
distribution.
To address the continuing competition in the domestic home video market, the
Company has focused its resources on distributing an increased number of films
theatrically (both mainstream and specialized) and decreasing the releases of
straight-to-video films. The production and distribution of theatrical motion
pictures requires capital commitments which may not be recouped, if at all,
until the picture is released in home video, international and ancillary
markets.
Domestic Home Video: Net revenues from domestic home video increased $4.2
- -------------------
million, or 12%, for the year ended June 30, 1997 compared with the prior fiscal
year. In fiscal 1997 the Company released 27 motion pictures for the domestic
home video rental market compared to 34 motion pictures released in fiscal 1996
and 47 motion pictures released in fiscal 1995. The increase in fiscal 1997
revenues was primarily due to the release on home video of "Meet Wally Sparks"
which had a wide theatrical release and generated $7.6 million domestic home
video revenue compared to fiscal 1996 when no video releases had comparable
theatrical releases. The decrease in the number of titles released to the
domestic home video rental market in both fiscal 1997 and 1996 was due to
management's strategic decision to release fewer titles, due to the crowded home
video market, and endeavor to increase the number of titles which have prior
theatrical releases. The Company plans to release approximately thirty two (32)
titles to the domestic home video rental market in fiscal 1998. The increase in
scheduled fiscal 1998 releases as compared to fiscal 1997 is primarily due to
the availability of additional titles which have had prior theatrical releases.
In addition, sell-thru revenue, a growing component of the domestic home video
-24-
<PAGE>
ITEM 7. (CONTINUED)
marketplace, increased to $6.7 million, a 40% increase from fiscal 1996. The
increase in sell-thru revenue was primarily due to the release of the Director's
cut edition of "Natural Born Killers" and the release of six (6) tapes
containing episodes of the Japanese animation series "Dragon Ball". Comparable
fiscal 1996 initial sell-thru releases were "Alien Autopsy: Fact of Fiction,"
"Monster in My Pocket" and "Miracles and Visions: Fact or Fiction". Net
revenues from domestic home video decreased $17.5 million, or 34% for the year
ended June 30, 1996 compared with the prior year. The decrease in fiscal 1996
revenues was primarily due to the 28% decrease in the number of titles released
and was partially offset by increased sell-thru revenue which increased to $4.8
million, a 55% increase from fiscal 1996. The decrease in the number of titles
released was due to management's strategic decision to release fewer direct to
video titles, due to the crowded home video market, and endeavor to increase the
number of titles which have prior theatrical releases.
The Company anticipates that the domestic home video market will continue to be
extremely competitive.
Theatrical Distribution: Net revenues from domestic theatrical distribution
- -----------------------
increased $5.1 million to $5.4 million for the year ended June 30, 1997 compared
with the prior year. The increase was primarily attributable to the Company's
new focus on theatrical distribution. In fiscal 1997 the Company released five
motion pictures theatrically, two mainstream - "Meet Wally Sparks" and "Sprung"
and three (3) specialized "Kama Sutra: A Tale of Love," "Ripe" and "Nothing
Personal" compared to fiscal 1996 which had four (4) limited theatrical releases
generating approximately $300,000 in revenue. The Company anticipates releasing
six (6) to eight (8) titles theatrically in fiscal 1998, including the comedy
"Chairman of the Board" starring Carrot Top and the family adventure "Star Kid"
(formerly titled "Warrior of Waverly Street") produced by Jennie Lew Tugend who
also produced the "Free Willy" movies. Net revenues decreased $1.5 million, or
84%, for the year ended June 30, 1996 compared with the prior year. The
decrease was primarily attributable to fiscal 1996 having four (4) limited
theatrical releases as compared to fiscal 1995 which included the sale of
domestic theatrical rights to "A Kid in King Arthur's Court."
Television Distribution: Net revenues from television distribution which
- -----------------------
includes such media as basic cable, pay television, pay-per-view and syndication
decreased $239,000 or 5%
-25-
<PAGE>
ITEM 7. (CONTINUED)
for the year ended June 30, 1997 compared with the prior year. The decrease was
due to a decrease in basic cable sales partially offset by an increase in
syndication revenue. Net revenues decreased $2.8 million or 36% for the year
ended June 30, 1996 compared with the prior year. This decrease was primarily
due to two titles being licensed as "premieres" to premium cable channels in
fiscal 1996 as compared to three (3) titles in fiscal 1995.
International Distribution: Net revenues from international distribution
- --------------------------
decreased $4.9 million or 28% for the year ended June 30, 1997 compared with the
prior year. The decrease was primarily due to the timing of releases. In
fiscal 1997, the Company initially licensed four (4) motion pictures for
international distribution compared to seven (7) motion pictures initially
licensed in fiscal 1996 and eight (8) motion pictures in fiscal 1995. During
fiscal 1998 the Company plans to release approximately seven (7) to nine (9)
motion pictures initially into international distribution. Net revenues from
international distribution decreased $4.1 million or 19% for the year ended June
30, 1996 compared with the prior year. The decrease was primarily due to the
release of fewer motion pictures in fiscal 1996 as compared to fiscal 1995 in
the international marketplace.
Trimark Interactive Distribution: Net revenues from interactive distribution
- --------------------------------
decreased $853,000 or 39% for the year ended June 30, 1997 compared with the
prior year. The decrease was primarily due to the Company's decision to exit
the interactive entertainment software and multimedia business and to sell
substantially all assets (primarily intellectual properties and inventory) of
Trimark Interactive to an unrelated independent entertainment and interactive
music publisher in March 1997. Interactive revenues for fiscal 1997 primarily
reflect the initial release of the Sony PlayStation version of "The Hive."
Fiscal 1996 interactive revenues primarily reflect the initial release of the
Windows 95 version of "The Hive." In fiscal 1996 net revenues increased
$728,000 or 49.5% for the year ended June 30, 1996 compared with the prior year.
The increase was due to the release of the Windows 95 version of the game "The
Hive" with no comparable major title release in fiscal 1995. Revenues in fiscal
1995 were primarily generated from the initial distribution and sublicense of
acquired product including "Warlock," "Tornado," "Air Havoc Controller,"
"Thumbelina" and "White Men Can't Jump."
-26-
<PAGE>
ITEM 7. (CONTINUED)
GROSS PROFIT: The Company's gross profit for the year ended June 30, 1997
increased $7.4 million or 317% compared with the prior year. Gross profit as a
percentage of net revenues increased to 15% as opposed to 4% for fiscal 1997
compared with fiscal 1996. Gross profit in fiscal 1997 was negatively impacted
by a $3.0 million write down of film costs to estimated net realizable value
associated with the January 1997 theatrical release of "Meet Wally Sparks."
Fiscal 1996 results were negatively impacted by reserves and write downs taken
for the Interactive Division, write downs associated with the video releases of
"Death Machine" and "Kids", the disappointing performances of additional home
video titles released during fiscal 1996 and write downs associated with foreign
distribution. In fiscal 1996 gross profit decreased $11.9 million or 84%
compared with the prior year. Gross profit as a percentage of net revenues
decreased to 4% as opposed to 17% for fiscal 1996 compared with fiscal 1995.
The decrease in gross profit and gross profit margins were primarily due to the
reserves and write downs taken in fiscal 1996.
SELLING EXPENSES: The Company's selling expenses increased $505,000 or 8% for
the year ended June 30, 1997 compared with the prior year and increased
$637,000, or 11% in fiscal 1996 compared with fiscal 1995. The increase in
fiscal 1997 was primarily due to the increase in theatrical operations partially
offset by the decrease in interactive operations. During the quarter ended
March 31, 1997, the Company sold substantially all assets of Trimark
Interactive. The increase in fiscal 1996 over fiscal 1995 was primarily
attributable to the costs associated with increased selling efforts in
television, domestic video and sell-thru.
Selling expenses as a percentage of net revenues for fiscal 1997, fiscal 1996
and fiscal 1995 were 11%, 11% and 7%, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
decreased $1.2 million or 22% for the year ended June 30, 1997 compared with the
prior year. General and administrative expenses decreased $426,000 or 7% for
the year ended June 30, 1996 compared with the prior year. The decreases were
primarily attributable to savings associated with a Company reorganization and
the related layoffs undertaken in January 1996.
-27-
<PAGE>
ITEM 7. (CONTINUED)
BAD DEBT EXPENSE: Bad debt expense increased $290,000 to $321,000 for the year
ended June 30, 1997 compared with the prior year and decreased $245,000 to
$31,000 for fiscal 1996 compared with fiscal 1995. Bad debt expenses for the
periods primarily represent reserves taken against domestic video and foreign
sales. Fiscal 1996 bad debt expense was low primarily due to the collection of
past due international receivables and the settlement of certain past due
domestic video receivables during fiscal 1996. The increase for fiscal 1997 is
primarily due to a $200,000 increase in past due video receivables.
INTEREST EXPENSE: Interest expense increased $1.1 million or 128% for the year
ended June 30, 1997 compared with the prior year. The increase in interest
expense was primarily due to higher levels of borrowing under the Company's
credit facility for the acquisition, distribution, and marketing of theatrical
motion pictures as compared to direct-to-video motion pictures. Theatrical
releases have a greater length of time from initial investment in film costs to
recoupment in home video and international markets. Film costs for released and
completed not yet released titles increased $18.4 million to $39.2 million at
June 30, 1997 as compared to $20.8 million at June 30, 1996. Interest expense
decreased $383,000 for fiscal 1996 compared with fiscal 1995. The decrease was
due to lower levels of borrowings under the credit facilities for purposes of
funding the costs of acquiring and distributing motion pictures during the
period as compared to fiscal 1995. See "Liquidity and Capital Resources."
INTEREST AND INVESTMENT INCOME: Interest and investment income decreased
$11,000 for the year ended June 30, 1997 compared with the prior year. Interest
and investment income increased $57,000 for the year ended June 30, 1996
compared with the prior year. The decrease in fiscal 1997 and the increase in
fiscal 1996 are primarily due to interest from the federal government related to
refunds on prior year amended tax returns received in fiscal 1996.
NET (LOSS) EARNINGS: The Company's net loss for fiscal 1997 was $3.5 million.
The fiscal 1997 loss was primarily due to a $3.0 million write down of film
costs to estimated net realizable value associated with the January 1997
theatrical release of "Meet Wally Sparks." Earnings were also negatively
impacted by higher interest expenses resulting from the Company's release of
-28-
<PAGE>
ITEM 7. (CONTINUED)
theatrical motion pictures as compared to release of direct-to-video motion
pictures. Theatrical releases have a greater length of time from initial
investment in film costs to recoupment in home video and other ancillary
markets, see "Liquidity and Capital Resources." The Company's net loss for
fiscal 1996 was $7.8 million. The fiscal 1996 loss was primarily attributable
to losses associated with Trimark Interactive and the performance of the
domestic home video and international markets.
INFLATION:
Generally, costs in connection with the acquisition and distribution of motion
pictures for release have increased in recent years. Such cost increases may
affect results of operations in the future; however, the Company believes that
the effect of such factors has not been material to date.
LIQUIDITY AND CAPITAL RESOURCES:
In fiscal 1997 the Company experienced negative cash flow from operations due to
investments in film cost and increases in accounts receivable.
In fiscal 1997 the Company made significant investments in film costs. The
Company invested $67.0 million in new additions to film inventory. The
additions were primarily incurred to build up the Company's theatrical film
slate.
Two principal factors have increased the length of time from investment in film
costs to recoupment. The first factor is the terms of the Company's new credit
facility. Under the Company's new credit facility, described below, the Company
directly pays production costs that generally were previously paid by off
balance sheet production company financing. This change in financing has
accelerated certain film acquisition payments that were previously made at the
time of film delivery and are now made periodically throughout the production
process. The production process often takes from six months to a year or more.
Commitments to purchase films from production companies upon delivery are
included in contingent contractual obligations. The Company's contingent
contractual obligations as of June 30, 1997 was $5.2 million, a decrease of
$30.3 million from June 30, 1996. The second factor is increased emphasis on
theatrical distribution. Theatrical films generally require significant
-29-
<PAGE>
ITEM 7. (CONTINUED)
marketing expenditures for prints and advertising which are capitalized as film
costs. Theatrical marketing campaigns begin well in advance of the theatrical
release to generate the maximum level of awareness for the film. The opening
date must be carefully selected and is often changed to address competition,
screen availability and other factors. In addition, the decision to release a
film theatrically is often not made until a theatrical test is conducted which
can take several months. The home video release and other ancillary market
revenues are also not realized for several months to years after the theatrical
release. All the above factors have contributed to the Company's $42.7 million
increase in debt for the year ended June 30, 1997.
The Company's cash requirements vary with the size and timing of production
advances and minimum guarantee payments along with the timing of its theatrical,
home video, television and international releases. In fiscal 1997 the principal
sources of funds have been provided by borrowings under the Company's credit
facility.
The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., on December 20, 1996 entered into a $75 million
revolving credit facility with a consortium of banks agented and arranged by The
Chase Manhattan Bank which replaced a $25 million revolving credit facility with
Bank of America NT & SA and Westdeustche Landesbank. The credit facility
expires December 19, 2000. Under the credit agreement, the Company may borrow
for various corporate purposes provided that the aggregate borrowings do not
exceed the Borrowing Base which is derived from specified percentages of
approved accounts receivable and film library. The credit agreement is
guaranteed by the Company and certain of its subsidiaries and is secured by
substantially all of the assets of the Company and its significant subsidiaries.
Loans outstanding under the credit facility bear interest at the rate of 1.25%
above Chase Manhattan's prime rate or 2.25% above Chase Manhattan's London
Interbank Market for Eurodollars for the loan term specified. An unused
commitment fee is payable on the average unused availability under the credit
facility, at the rate of 0.375% per annum. As of June 30, 1997 there was $57.7
million outstanding under the credit facility.
The Company believes that its present sources of working capital will be
sufficient to maintain its level of operations in accordance with the
anticipated release schedule, as described below.
-30-
<PAGE>
ITEM 7. (CONTINUED)
During fiscal 1998, the Company plans to distribute approximately three (3)
films for mainstream domestic theatrical release. "Eve's Bayou" is scheduled
for a November 1997 release. "Star Kid" and "Chairman of the Board" are
scheduled for release in the first half of calendar 1998. In the domestic
specialized theatrical market the Company plans to release approximately three
(3) to five (5) motion pictures in fiscal 1998. During fiscal 1998 the Company
plans to release approximately thirty-two (32) motion pictures into the domestic
home video rental market and to continue to expand distribution in the sell-thru
market. Also in fiscal 1998 the Company plans to release approximately seven
(7) to nine (9) motion pictures initially into international distribution.
Technicolor Videocassette, Inc. currently serves as the Company's video cassette
duplicator and fulfillment contractor. Technicolor Videocassette, Inc. has a
general lien on all of the Company's materials and products in its possession.
As of June 30, 1997, the Company had incurred aggregate net expenditures of $5.5
million (approximately $300,000 expended in fiscal 1997) in Trimark Interactive,
its 90% owned subsidiary. As previously reported, in March 1997 the Company
sold substantially all assets of Trimark Interactive to an unrelated independent
entertainment and interactive music publisher. In consideration for the assets
sold the Company received 237,037 shares of non-registered convertible preferred
stock in the acquiring company. The convertible preferred shares can be
converted into 237,037 shares of common stock of the acquiring company and carry
a mandatory three year redemption value of $800,000 if not converted prior to
three years. The consideration received was determined by arms length
negotiation and advice from an investment banking firm retained by the Company.
Due to the uncertainty of realizing any value from the convertible preferred
stock the Company is carrying the stock at a zero value. No gain or loss was
recognized from the sale of the assets. As a result of this asset sale, the
Company does not expect any significant future expenditures in Trimark
Interactive.
On February 21, 1997, the Company announced a stock repurchase program pursuant
to which it could spend up to $1,500,000, $750,000 per fiscal year, to purchase
shares of its outstanding common stock in the open market. During fiscal 1997,
the Company spent approximately $707,000 under the repurchase program.
-31-
<PAGE>
ITEM 7. (CONTINUED)
As a result of recent merger and acquisition activity in the entertainment
industry, the Company, as a leading independent distributor of specialized
theatrical, television and video product, received certain unsolicited inquires
from interested parties. Accordingly, on July 21, 1997, the Company announced
that it had retained the investment banking firm, Societe Generale Bannon, to
advise the Company on various strategic alternatives to help enhance shareholder
value.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievement of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: General
economic and business conditions, which will, among other things, impact demand
for the Company's products; changes in public tastes, industry trends and
demographic changes, which may influence the distribution and exhibition of
films in certain areas; public reaction to and acceptance of the Company's
video, theatrical and television product, which will impact the Company's
revenues; competition, including competition from major motion picture studios,
which may affect the Company's ability to generate revenues; reliance on
management and key personnel; consolidation in the retail video industry;
whether the Company's shift in strategy to release an increased number of films
theatrically and a decreased number of straight to video films is successful;
new methods of distributing motion pictures; and other factors referenced in
this Form 10-K and the Company's other filings with the Securities and Exchange
Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable.
-32-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF TRIMARK HOLDINGS, INC.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) on page 52 present fairly, in all material respects,
the financial position of Trimark Holdings, Inc. and its subsidiaries at June
30, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Century City, California
September 18, 1997
-33-
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
----------------------------------------
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 30, June 30,
Assets 1997 1996
------ --------- ---------
<S> <C> <C>
Cash and cash equivalents $ 3,665 $ 344
Accounts receivable, less allowances of
$4,010 and $4,269, respectively 23,124 12,457
Film costs, net (Note 3) 57,293 29,853
Deferred marketing costs (Note 2) 1,696 1,524
Inventories, net (Note 2) 650 624
Property and equipment at cost, less accumulated
depreciation of $2,049 and $1,749, respectively (Note 2) 808 604
Due from officers (Note 13) 662 --
Other assets (Note 6) 2,325 2,995
------- -------
$90,223 $48,401
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Debt (Note 5) $57,700 $15,000
Accounts payable and accrued expenses (Note 4) 7,575 2,191
Minimum guarantees and royalties payable 3,391 4,639
Deferred income 1,283 2,144
Income taxes payable (Note 6) 65 77
------- -------
Total liabilities 70,014 24,051
------- -------
Commitments and contingencies (Note 9) -- --
------- -------
Stockholders' equity (Note 7):
Common stock, $.001 par value. Authorized
20,000,000 shares; 5,099,081 shares issued
at June 30, 1997 and 5,064,581 shares
issued at June 30, 1996 5 5
Additional paid in capital 15,474 15,385
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding -- --
Retained earnings 9,160 12,683
Less treasury shares, at cost - 952,200 shares
and 789,850 shares (Note 8) (4,430) (3,723)
------- -------
Stockholders' equity 20,209 24,350
------- -------
$90,223 $48,401
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
-34-
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------
(Amounts in Thousands, Except (Loss) Earnings Per Share)
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net revenues (Note 2) $63,165 $59,832 $84,994
Film costs and distribution expenses (Note 2) 53,421 57,495 70,721
------- ------- -------
Gross profit 9,744 2,337 14,273
------- ------- -------
Operating expenses:
Selling 6,857 6,352 5,715
General and administrative 4,239 5,447 5,873
Bad debt 321 31 276
------- ------- -------
11,417 11,830 11,864
------- ------- -------
Operating (loss) earnings (1,673) (9,493) 2,409
Other (income) expenses:
Interest expense 1,934 847 1,230
Interest and investment income (84) (95) (38)
Minority interest -- (38) (422)
------- ------- -------
1,850 714 770
------- ------- -------
(Loss) earnings before income taxes (3,523) (10,207) 1,639
Income taxes (Note 6) -- (2,380) 656
------- ------- -------
Net (loss) earnings $(3,523) $(7,827) $ 983
======= ======= =======
Net (loss) earnings per common share (Note 2) $(0.84) $(1.83) $0.22
======= ======= =======
Average common and common equivalent shares
outstanding used in computation 4,217 4,284 4,493
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
-35-
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Stock
------------------ Additional Total
paid in Retained Treasury stockholders'
Shares Amount capital earnings stock equity
--------- ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 4,323,148 $ 5 $ 15,178 $ 19,527 $ (2,801) $ 31,909
Purchase of treasury stock (Note 8) (66,000) (493) (493)
Exercise of stock options 64,833 173 173
Net earnings 983 983
--------- ------ ---------- -------- -------- -------------
Balance, June 30, 1995 4,321,981 5 15,351 20,510 (3,294) 32,572
--------- ------ ---------- -------- -------- -------------
Purchase of treasury stock
(Note 8) (55,750) (429) (429)
Exercise of stock options 8,500 34 34
Net loss (7,827) (7,827)
--------- ------ ---------- -------- -------- -------------
Balance, June 30, 1996 4,274,731 5 15,385 12,683 (3,723) 24,350
--------- ------ ---------- -------- -------- -------------
Purchase of treasury stock
(Note 8) (162,350) (707) (707)
Exercise of stock options 34,500 89 89
Net loss (3,523) (3,523)
--------- ------ ---------- -------- -------- -------------
Balance, June 30, 1997 4,146,881 $ 5 $ 15,474 $ 9,160 $ (4,430) $ 20,209
========= ====== ========== ======== ======== =============
</TABLE>
See accompanying notes to consolidated financial statements
-36-
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net (loss) earnings $ (3,523) $ (7,827) $ 983
Adjustments to reconcile net loss (earnings) to
net cash used by operating activities:
Film amortization 39,514 36,561 47,858
Depreciation and other amortization 300 275 292
Provision for returns 72 (501) (264)
Provision for bad debt (331) (149) 164
Provision for inventory obsolescence (494) 202 3
Minority interest in net (loss) earnings -- (38) (422)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (10,408) 9,622 --
Additions to film costs (66,954) (32,022) (50,487)
(Increase) decrease in deferred marketing costs (172) 1,068 524
Decrease (increase) in inventories 468 (284) (218)
Increase in notes receivable from officers (662) -- --
Decrease (increase) in other assets 670 (159) (313)
Increase (decrease) in accounts payable and
accrued expenses 5,384 (1,180) (1,700)
Decrease in minimum guarantees and
royalties payable (1,248) (3,648) (3,753)
(Decrease) increase in income taxes payable (12) (1,042) 1,119
(Decrease) increase in deferred income (861) 146 847
-------- -------- --------
Net cash (used) provided by operating activities (38,257) 1,024 (5,367)
-------- -------- --------
Investing activities:
Acquisition of property and equipment (504) (20) (440)
-------- -------- --------
Net cash used by investing activities (504) (20) (440)
-------- -------- --------
Financing activities:
Net increase (decrease) in debt 42,700 (2,000) 5,000
Exercise of stock options 89 34 173
Capital contribution by minority shareholder -- -- 350
Purchase of treasury stock (707) (429) (493)
-------- -------- --------
Net cash provided (used) by financing activities 42,082 (2,395) 5,030
-------- -------- --------
Increase (decrease) in cash and cash equivalents 3,321 (1,391) (777)
Cash and cash equivalents at beginning of period 344 1,735 2,512
-------- -------- --------
Cash and cash equivalents at end of period $ 3,665 $ 344 $ 1,735
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
-37-
<PAGE>
TRIMARK HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
- ---------------------
Trimark Holdings, Inc., a Delaware corporation (the "Company"), is a broad-based
entertainment company which distributes and licenses motion pictures in the
international and domestic arena through its wholly owned subsidiaries Trimark
Pictures, Inc. and Trimark Television, Inc.. The significant business
activities of the Company constitute one business segment, filmed entertainment.
The Company is primarily engaged in the distribution of feature films for the
domestic home video market, domestic theatrical and television markets, and in
the licensing of distribution rights to motion pictures for foreign markets. As
an independent distribution company, the Company acquires distribution rights
from a wide variety of studios, production companies and independent producers.
In March of 1993, the Company formed Trimark Interactive to expand the core
business of film production and video distribution into the emerging market for
interactive entertainment software and multimedia. The results of operations of
Trimark Interactive have been included in the Company's consolidated financial
statements since April 1, 1993. Trimark Holdings, Inc. increased its ownership
of Trimark Interactive from 80% to 90% in fiscal 1995. In March 1997, the
Company sold substantially all assets (primarily intellectual properties and
inventory) of Trimark Interactive to an unrelated independent entertainment and
interactive music publisher. In consideration for the assets sold the Company
received 237,037 shares of non-registered convertible preferred stock in the
acquiring company. The convertible preferred shares can be converted into
237,037 shares of common stock of the acquiring company and carry a mandatory
three year redemption value of $800,000 if not converted prior to three years.
The consideration received was determined by arms length negotiation and advice
from an investment banking firm retained by the Company. Due to the uncertainty
of realizing any value from the convertible preferred stock the Company is
carrying the stock at a zero value. No gain or loss was recognized from the
sale of the assets. The Company is no longer engaged in the market for
interactive entertainment software and multimedia.
-38-
<PAGE>
NOTE 1 - (CONTINUED)
- -------------------
On June 1, 1992, the Company changed its name from Vidmark, Inc. to Trimark
Holdings, Inc. Certificates that previously represented shares of Vidmark
common stock now represent an equal number of shares of Trimark Holdings, Inc.
common stock.
Purple Tree Productions, Inc., Cheap Date, Inc., Loving Gun Productions, Inc.
and Writers on the Wave are wholly-owned subsidiaries of the Company, which were
formed for the sole purpose of producing motion pictures. Trimark Music, a
wholly-owned subsidiary of the Company, was formed for the purpose of exploiting
revenues from music rights owned by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ----------------------------------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. The minority interest separately disclosed
herein reflects the non-Company owned shareholder interest in Trimark
Interactive. All significant intercompany balances and transactions have been
eliminated.
Unclassified Consolidated Balance Sheet
- ---------------------------------------
In accordance with the provisions of Statement of Financial Accounting Standards
No. 53 ("SFAS 53"), the Company has elected to present an unclassified
consolidated balance sheet.
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from these estimates
Net Revenues and Film Costs
- ---------------------------
Home video revenues are recognized, net of allowances for estimated returns, as
products are shipped to customers. Revenues from licenses of films to foreign
territories are
-39-
<PAGE>
NOTE 2 - (Continued)
- --------------------
recognized when the films are made available to sub-distributors and other terms
of the license agreements are satisfied.
Film costs include the direct costs of acquiring and in some instances producing
motion pictures and are capitalized as incurred. Exploitation costs which
benefit future periods are also capitalized. Capitalized costs, which include
interest, are charged to expense, in the proportion that current revenues for
each film bear to that film's estimated ultimate total revenues. Film costs are
stated at the lower of net unamortized cost or net realizable value.
Cash
- ----
Cash includes cash equivalents. The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Inventories
- -----------
Inventories, net of an allowance for excess quantities and obsolescence, are
stated at the lower of cost or market using a first-in/first-out (FIFO) method
of accounting.
Property and Equipment
- ----------------------
Depreciation of property and equipment is computed using the straight-line
method, based on estimated useful lives of three to seven years.
Net (Loss) Earnings Per Common Share
- ------------------------------------
Net (loss) earnings per common share is based upon the weighted average number
of common and common equivalent shares outstanding during each period. Common
equivalent shares represent the number of shares which would be issued assuming
the exercise of dilutive common stock options, reduced by the number of shares
which could be purchased with proceeds from the exercise of such options.
-40-
<PAGE>
NOTE 3 - FILM COSTS:
- --------------------
Film costs primarily represent the acquisition of film rights from producers for
a guaranteed minimum payment, with the producer retaining a participation in the
profits of the property. The producer's share of the profits is retained by the
Company until it equals the amount of the guarantee, after which the excess is
paid to the producer. In these instances, the Company records as participation
expense an amount equal to the producer's share of the profits. The guaranteed
minimum payments are capitalized and amortized using the individual-film-
forecast-computation method in accordance with SFAS 53. Based on the Company's
estimate of future revenues as of June 30, 1997, approximately 95% of
unamortized released film costs will be amortized during the next three years.
Film costs, net of amortization, consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
(in thousands)
Released 32,159 $17,766
Completed not released 7,045 3,065
In process and development 18,089 9,022
------- -------
$57,293 $29,853
------- -------
</TABLE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
- -----------------------------------------------
<TABLE>
<CAPTION>
June 30,
---------------
1997 1996
------ ------
<S> <C> <C>
(in thousands)
Accrued marketing costs $5,159 $ 549
Accounts payable 2,178 1,388
Accrued other expenses 238 254
------ ------
$7,575 $2,191
------ ------
</TABLE>
-41-
<PAGE>
NOTE 5 - DEBT:
- --------------
The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., have a $75 million revolving credit facility with a
consortium of banks agented and arranged by The Chase Manhattan Bank expiring on
December 20, 2000. Under the credit agreement, the Company may borrow for
various corporate purposes provided that the aggregate borrowings do not exceed
the Borrowing Base which is derived from specified percentages of approved
accounts receivable and film library. The credit agreement is guaranteed by the
Company and secured by substantially all of the assets of the Company and its
significant subsidiaries. Loans outstanding under the credit facility bear
interest at the rate of 1.25% above Chase Manhattan's prime rate (8.5% at June
30, 1997) or 2.25% above Chase Manhattan's London interbank rate for the loan
term specified. An unused commitment fee is payable on the average unused
availability under the credit facility, at the rate of 0.375% per annum. As of
June 30, 1997 there was $57.7 million outstanding under the bank facility.
In connection with the credit facility, the Company has capitalized debt
issuance costs as other assets which are being amortized on a straight line
basis over the term of the agreement.
NOTE 6 - INCOME TAXES:
- ----------------------
Consolidated (loss) earnings before income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended
June 30,
1997 1996 1995
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Domestic ($5,372) ($11,872) ($1,690)
Foreign 1,849 1,665 3,329
------- ------- --------
($3,523) ($10,207) $ 1,639
------- ------- --------
</TABLE>
-42-
<PAGE>
NOTE 6 - (CONTINUED)
- -------------------
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Year ended
June 30,
1997 1996 1995
----- ------- -------
(in thousands)
<S> <C> <C> <C>
Current
Federal $ -- ($4,657) $ 1,679
State 16 (453) 510
Foreign 433 539 835
----- ------- -------
449 (4,572) 3,024
----- ------- -------
Deferred
Federal (684) 1,972 (1,973)
State 235 219 (395)
----- ------- -------
(449) 2,191 (2,368)
----- ------- -------
$ -- ($2,380) $ 656
----- ------- -------
</TABLE>
The components of the deferred tax assets and liabilities are summarized as
follows:
<TABLE>
<CAPTION>
Year ended June 30,
--------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforward $ 7,232 $ 3,478
Foreign tax credit carryforward 2,095 2,095
Reserves and allowances 816 915
Bad debts 768 413
Deferred income 418 846
State income taxes 39 --
Other 145 178
------- -------
11,513 7,925
Deferred Tax Liabilities:
Film cost amortization (5,519) (3,937)
State taxes -- (75)
------- -------
Net deferred tax asset before
valuation allowance 5,994 3,913
Valuation allowance (6,045) (3,990)
------- -------
Net deferred tax (liability)
asset ($ 51) ($ 77)
------- -------
</TABLE>
-43-
<PAGE>
NOTE 6 - (CONTINUED)
- -------------------
A reconciliation of the federal statutory tax rate to the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Federal income tax rate (34.0%) (34.0%) 34.0%
State taxes, net of
federal income tax benefit 4.7% (1.5%) 4.6%
Foreign taxes, net of
federal income tax benefit 8.1% -- --
Meals and entertainment
disallowance 1.2% 0.5% 2.5%
Utilization of loss
carryforward -- -- (4.5%)
Valuation Allowance 19.5% 11.8% --
Other 0.5% (0.2%) 4.4%
----- ------ -----
0.0% (23.4%) 41.0%
----- ------ -----
</TABLE>
The increase of approximately $2.1 million in the valuation allowance reserve is
primarily attributable to the establishment of reserves against the current year
net operating loss ("NOL"). For federal income tax purposes, NOLs may be
carried forward fifteen (15) years, or until such time as they are fully
utilized. For California purposes, NOLs may be carried forward for five (5)
years, or until such time as they are fully utilized. The valuation allowance
was established as a result of the uncertainty of the utilization of the current
year NOLs.
Additionally, a valuation allowance was established in prior years of
approximately $1.4 million against foreign tax credit carryforwards. These
credits have a five year expiration period and are scheduled to expire in the
years ending June 30, 1998 to June 30, 2000.
As a result of the acquisition of Trimark Television (formerly IBS) by the
Company, approximately $5.5 million in federal income tax NOLs were acquired.
The NOLs expire in the years 2004-2006. The Internal Revenue Code of 1986, as
amended, imposes substantial limitations on the use of NOL carryforwards
acquired in an acquisition. Accordingly, a valuation allowance has been
established in prior years and the related balance at June 30, 1997 is
approximately $2.6 million.
-44-
<PAGE>
NOTE 6 - (CONTINUED)
- -------------------
As of June 30, 1997, the deferred tax liability balance of $51,000 and current
income taxes payable of $13,500 are included in income taxes payable. At June
30, 1996, a deferred tax liability balance of $77,000 was included in income
taxes payable and an income taxes receivable balance of $2.1 million was
included in other assets.
NOTE 7 - STOCK OPTIONS:
- -----------------------
Under the Company's stock option plans, employees and directors may be granted
nonqualified stock options ("options"). Generally, options are exercisable
contingent upon the grantee's continued employment with the Company and
generally have been granted with an exercise price equal to the fair market
value of the underlying Common Stock on the date of grant. Each option is
granted subject to various terms and conditions established on the date of
grant, including vesting periods and expiration dates. The options typically
become exercisable at the rate of 33.3% annually, beginning one year after the
date of grant. Options generally expire 10 years after the date of grant. As
of June 30, 1997 and 1996, a total of 979,369 options had been approved for
issue under employee option plans and other arrangements. As of June 30, 1997
and 1996, a total of 40,000 options had been approved for issue under the
director option plan. Stock option data follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at July 1 715,476 $ 5.30 552,910 $ 6.33 528,244 $ 5.48
Granted 83,500 $ 5.73 360,100 $ 5.32 154,000 $ 8.05
Exercised (34,500) $ 2.59 (8,500) $ 4.01 (64,833) $ 2.67
Purchased -- -- -- -- (50,000) $ 6.00
Terminated (72,667) $ 8.05 (189,034) $ 8.87 (14,501) $ 6.27
------- -------- -------
Outstanding at June 30 691,809 $ 5.20 715,476 $ 5.30 552,910 $ 6.33
======= ======== =======
Exercisable at June 30 438,559 $ 5.11 445,965 $ 5.01 340,442 $ 5.28
======= ======== =======
Available for grant at
June 30 199,161 209,994 187,393
======= ======== =======
</TABLE>
-45-
<PAGE>
NOTE 7 - (CONTINUED)
- -------------------
The following table summarizes information concerning outstanding and
exercisable stock options at June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- ---------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life in Exercise Number Exercise
Prices of Shares Years Price of Shares Price
- -------------- --------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
$2.40 - $6.00 584,476 6.80 $ 4.84 367,766 $ 4.73
$6.25 - $11.50 107,333 8.05 $ 7.19 70,793 $ 7.11
--------- ----------- -------- ---------- --------
$2.40 - $11.50 691,809 6.99 $ 5.20 438,559 $ 5.11
========= =========== ======== ========== ========
</TABLE>
The Company has adopted SFAS No. 123, "Accounting of Stock-Based Compensation,"
which establishes a fair value based method of accounting for compensation cost
related to stock option plans and other forms of stock-based compensation plans,
by providing the pro forma disclosures as if the fair value based method had
been applied for the current period and prior comparable period. In accordance
with SFAS No. 123, the Company applies the intrinsic value based method of
accounting defined under Accounting Principles Board Opinion No. 25 and
accordingly, does not recognize compensation expense for its plans.
Had compensation cost for the plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's pretax and after tax income would decrease by
$440,000 or $0.10 per share and $136,000 or $0.03 per share in fiscal 1997 and
fiscal 1996, respectively. These pro forma amounts may not be representative of
future disclosures since the estimated fair value of stock options is amortized
to expense over the vesting period, and additional options may be granted in
future years.
The weighted average fair value of each option as of the grant date was $3.41
and $4.15 for fiscal 1997 and fiscal 1996, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option-
pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
fiscal 1997 fiscal 1996
----------- -----------
<S> <C> <C>
Expected dividend yield (a) -- --
Expected stock price volatility 81.42% 81.42%
Risk-free interest rate 6.40% 6.36%
Expected life of options (years) 5.94 5.94
</TABLE>
-46-
<PAGE>
NOTE 7 - (CONTINUED)
- -------------------
(a) During fiscal 1997 and 1996, the Company did not declare any cash dividends
on its common stock. The Company does not have any present intention to
declare a dividend on its common stock in the foreseeable future.
NOTE 8 - TREASURY STOCK:
- ------------------------
On February 21, 1997, the Company announced a stock repurchase program pursuant
to which it could spend up to $1,500,000, $750,000 per fiscal year, to purchase
shares of its outstanding common stock in the open market. During fiscal 1997,
the Company spent approximately $707,000 to purchase 162,350 shares under the
repurchase program.
On December 6, 1994, the Company announced a stock repurchase program pursuant
to which it could buy up to $1,250,000 of its outstanding common stock in the
open market. During fiscal 1996, the Company spent approximately $429,094 to
purchase 55,750 shares under the repurchase program.
At June 30, 1997, the Company held 952,200 shares of treasury stock.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
- ---------------------------------------
The Company has entered into certain agreements which provide for guaranteed
royalty advances and promotional and advertising payments totaling $5.2 million.
If the provisions of these agreements are not met by the licensors, the Company
may withdraw from the arrangements. These commitments extend to January 1998.
As of June 30, 1997, the Company had an operating lease for its corporate office
space for a remaining term of three years. Rent expense was $368,000 for the
year ended June 30, 1997 and $363,000 and $382,000 for the years ended June 30,
1996 and 1995, respectively.
-47-
<PAGE>
NOTE 9 - (CONTINUED)
- -------------------
The future minimum rental commitments as of June 30, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended
June 30,
-------------
<S> <C>
1997 $ 388
1998 323
1999 --
2000 --
Thereafter --
------
$ 711
</TABLE> ------
NOTE 10 - MAJOR CUSTOMERS:
- --------------------------
For the years ended June 30, 1997, 1996 and 1995, Ingram, the Company's major
customer, accounted for 12%, 12% and 14% of net revenues, respectively. For the
year ending June 30, 1996 East Texas accounted for 10% of net revenues and was
not more than 10% of net revenues in fiscal 1997 or fiscal 1995. With regard to
foreign distribution net revenues, there are no individual geographic areas that
account for more than 10% of total net revenues.
In carrying out its film distribution activities, the Company grants credit to
customers, primarily all of whom are in the film distribution segment of the
entertainment industry. This customer base is sufficiently diversified by
number of customers, channels of distribution (theatrical exhibition, video
distribution, pay television, cable television and other) and geographic
location to prevent any undue risk related to concentration of credit.
NOTE 11 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Cash paid during the year for:
Year ended June 30,
---------------------------
1997 1996 1995
-------- ------- --------
(in thousands)
<S> <C> <C> <C>
Interest $2,593 $1,186 $1,442
Income Taxes 433 1,322 1,494
</TABLE>
-48-
<PAGE>
NOTE 11 - (Continued)
- ---------------------
Interest costs capitalized as film costs in fiscal 1997, fiscal 1996 and fiscal
1995 were $935,000, $396,000 and $208,000, respectively.
NOTE 12 - NEW ACCOUNTING PRONOUNCEMENTS:
- ----------------------------------------
There are no new accounting pronouncements that are expected to have a material
impact on the Company's financial position or results of operations
NOTE 13 - RELATED PARTY TRANSACTIONS:
- -------------------------------------
Notes Receivable From Officers
- ------------------------------
Notes receivable from officers are secured by Trimark Holdings stock equal to at
least 200% of the outstanding loan amount. The loans bear interest at the
Company's weighted average cost of capital and interest is due quarterly. The
loans are due on June 30, 2000.
-49-
<PAGE>
SCHEDULE II
TRIMARK HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance Additions Additions Balance
at Beginning Charged to Charged to at End
Description of Period Expense Net Revenues Deductions of Period
- ----------- --------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Provision for returns and
bad debts (1):
Year Ended June 30, 1995 $5,019 $276 $(264) $112 (2) $4,919
Year Ended June 30, 1996 4,919 30 (501) 179 (2) 4,269
Year Ended June 30, 1997 4,269 321 72 652 (2) 4,010
Provision for inventory
obsolescence:
Year Ended June 30, 1995 615 3 -- -- 618
Year Ended June 30, 1996 618 202 -- -- 820
Year Ended June 30, 1997 820 -- -- 494 326
- ---------------------------
</TABLE>
(1) Returns are reflected in net revenues and bad debt expense is recorded
separately in the statement of operations.
(2) Doubtful receivables written-off, net of recoveries.
-50-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive officers is incorporated herein
by reference from the sections entitled "Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Registrant's 1997 Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated herein by
reference from the sections entitled "Executive Compensation and Related
Matters," "Compensation Committee Interlocks and Insider Participation,"
"Compensation Committee and Stock Option and Stock Appreciation Rights Plan
Committee Report on Executive Compensation" and "Stock Performance" in the
Registrant's 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the section entitled
"Security Ownership of Certain Beneficial Owners and Management" in the
Registrant's 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED MATTERS
Information concerning certain relationships and related transactions is
incorporated herein by reference from the section entitled "Executive
Compensation and Related Matters" in the Registrant's 1997 Proxy Statement.
-51-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements included in Part II of this report:
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Report of Independent Accountants 33
Consolidated Balance Sheets at June 30, 1997 and 1996 34
For the years ended June 30, 1997, 1996 and 1995:
Consolidated Statements of Operations 35
Consolidated Statements of 36
Stockholders' Equity
Consolidated Statements of Cash Flows 37
Notes to Consolidated Financial Statements 38-49
Financial Statement Schedules:
II. Valuation and Qualifying Accounts 50
</TABLE>
All other schedules have been omitted either as inapplicable or not required
under the instructions contained in Regulation S-X or because the information is
included in the financial statements or the notes thereto.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
(i) Except as noted, all Exhibits, numbered as they were numbered for filing
as Exhibits to the Company's Form S-1 Registration Statement, No. 33-
35053, effective June 26, 1990, are incorporated herein by this
reference to such Registration Statements. All filings were made at the
Commissions office in Washington D.C.. The registrant's SEC file number
is 0-18613:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
2.1 Asset Purchase Agreement between the Registrant,
Trimark Interactive, and Graphix Zone, Inc.
dated February 26, 1997. 15
3.1 Certificate of Incorporation of the Registrant,
as amended to date. 4
</TABLE>
-52-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
3.2 By-laws of the Registrant, as amended. 8
4.2 Form of Common Stock Certificate. 4
10.2 Stock Purchase and Option Agreement, dated as of
September 1, 1987, as amended, by and between
Vidmark, Inc., a California corporation and Said
(Sam) Pirnazar. +
10.4 Stock Purchase and Option Agreement, dated as of
September 1, 1989, by and between Vidmark, Inc.,
a California corporation and Said (Sam)
Pirnazar. +
10.9 Employment Agreement, dated as of January 1,
1990, by and between Vidmark, Inc., a California
corporation and Barry Barnholtz. +
10.12 Consulting Agreement, dated as of January 1,
1990, by and between Vidmark, Inc., a California
corporation and Johan A. Wassenaar. +
10.13 1990 Stock Option and Stock Appreciation Rights
Plan of the Registrant, as amended. 13+
10.15 Amendment to Stock Option Agreements, dated as
of May 17, 1990, by and among the Registrant,
Vidmark, Inc., a California corporation and Said
(Sam) Pirnazar. +
10.22 Standard Office Lease - Gross, dated as of March
9, 1992, and amendments thereto, by and between
Vidmark, Inc., a California corporation and 2644
SM Partners, a California limited partnership. 4
10.25 Non-Qualified Stock Option Agreement dated
December 5, 1991, by and between the Registrant
and Gordon Stulberg. 4+
10.29 Non-Qualified Stock Option Agreement dated
December 2, 1992, by and between the Registrant
and Gordon Stulberg. 5+
</TABLE>
-53-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
10.32 Directors' Stock Option Plan of the Registrant.
13+
10.35 Technicolor Videocassette, Inc. Fulfillment
Agreement with Trimark Pictures, Inc. dated as
of March 1, 1994, by and between Trimark
Pictures, Inc., a California corporation and
Technicolor Videocassette, Inc. 7
10.36 Credit Agreement dated November 24, 1993, by and
between the Registrant's principal operating
subsidiaries, Trimark Pictures, Inc. and Trimark
Television, Inc., and Bank of America NT & SA
and Westdeustche Landesbank. 8
10.38 Employment Agreement, dated February 11, 1994,
by and between Trimark Pictures, Inc., a
California corporation and Timothy Swain. 8+
10.39 Employment Agreement, dated February 22, 1994,
by and between Trimark Pictures, Inc., a
California corporation and Sergio Aguero. 8+
10.41 Non-Qualified Stock Option Agreement dated March
31, 1994, by and between the Registrant and
Timothy Swain. 8+
10.42 Non-Qualified Stock Option Agreement dated March
31, 1994, by and between the Registrant and
Sergio Aguero. 8+
10.43 Non-Qualified Stock Option Certificate dated
January 14, 1994, by and between the Registrant
and Gordon Stulberg. 8+
10.45 Non-Qualified Stock Option Certificate dated
January 14, 1995, by and between the Registrant
and Gordon Stulberg. 10+
10.46 Non-Qualified Stock Option Certificate dated
January 14, 1995, by and between the Registrant
and Matthew Saver. 10+
</TABLE>
-54-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
10.47 Non-Qualified Stock Option Certificate dated
January 14, 1995, by and between the Registrant
and Tofigh Shirazi. 10+
10.48 Non-Qualified Stock Option Agreement dated
October 11, 1994, by and between the Registrant
and Barry Barnholtz. 10+
10.50 Letter amendment to Stock Option Agreements
dated August 10, 1995 by and between the
Registrant and Said (Sam) Pirnazar. 10+
10.51 Amendment No. 1 to credit agreement and waiver
of default. 10
10.52 Amendment No. 2 to credit agreement and waiver
of default, dated September 27, 1995. 11
10.53 Non-Qualified Stock Option Agreement, dated
January 30, 1996 by and between the Registrant
and Mark Amin. 11+
10.54 Amendment to Non-Qualified Stock Option
Agreement, dated January 30, 1996 by and between
the Registrant and Timothy Swain. 11+
10.55 Amendment to Non-Qualified Stock Option
Agreement, dated January 30, 1996 by and between
the Registrant and Barry Barnholtz. 11+
10.56 Amendment to stock option agreement dated March
31, 1994, by and between the Registrant and
Sergio Aguero. 12+
10.57 Non-Qualified Stock Option Agreement dated
August 10, 1995, by and between the Registrant
and Sergio Aguero. 12+
10.58 Non-Qualified Stock Option Certificate dated
January 14, 1996. by and between the Registrant
and Matthew Saver. 12+
</TABLE>
-55-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
10.59 Non-Qualified Stock Option Certificate dated
January 14, 1996. by and between the Registrant
and Tofigh Shirazi. 12+
10.60 Non-Qualified Stock Option Certificate dated
January 14, 1996. by and between the Registrant
and Gordon Stulberg. 12+
10.61 Employment Agreement dated July 1, 1996 between
the Registrant and Timothy Swain. 12+
10.62 Non-Qualified Stock Option Agreement dated July
2, 1996, by and between the Registrant and
Timothy Swain. 13+
10.63 Employment Agreement, dated August 30, 1995, by
and between Trimark Pictures, Inc., a California
corporation and Sergio Aguero, as amended to
date. 14+
10.64 Amendment No. 3 to credit agreement, dated
October 31, 1996. 14
10.65 Credit, Security, Guaranty and Pledge Agreement,
dated December 20, 1996, by and between the
Registrant's principal operating subsidiaries,
Trimark Pictures, Inc. and Trimark Television,
Inc., and The Chase Manhattan Bank, as
Administrative Agent and Fronting Bank. 14
10.66 Pledge Agreement, dated February 28, 1997, by
and between Trimark Pictures Inc. and Johan
Wassenaar and Anne Wassenaar. 16+
10.67 Secured Promissory Note, dated February 28,
1997, executed in favor of Trimark Pictures Inc.
by Johan Wassenaar. 16+
</TABLE>
-56-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
10.68 Letter waiver and amendment to Credit, Security,
Guaranty and Pledge Agreement, dated February
20, 1997, by and between the Registrant's
principal operating subsidiaries, Trimark
Pictures, Inc. and Trimark Television, Inc., and
The Chase Manhattan Bank, as Administrative
Agent and Fronting Bank. 16
10.69 Non-Qualified Stock Option Certificate dated
January 14, 1997, by and between the Registrant
and Matthew Saver. 16+
10.70 Non-Qualified Stock Option Certificate dated
January 14, 1997, by and between the Registrant
and Tofigh Shirazi. 16+
10.71 Non-Qualified Stock Option Certificate dated
January 14, 1997, by and between the Registrant
and Gordon Stulberg. 16+
10.72 Pledge Agreement, dated May 1, 1997, by and
between Trimark Pictures Inc. and Mark Amin and
Susan Amin. 1+
10.73 Secured Promissory Note, dated May 1, 1997, by
and between Trimark Pictures Inc. and Mark Amin.
1+
10.74 Employment Agreement, dated February 21, 1995,
by and between Trimark Pictures, Inc., a
California corporation and Don Gold. 1+
10.75 Addendum dated October 23, 1996 to Employment
Agreement, dated February 21, 1995, by and
between Trimark Pictures, Inc., a California
corporation and Don Gold. 1+
10.76 Letter amendment to Stock Purchase and Option
Agreement, dated July 25, 1997, by and between
the Registrant and Sam Pirnazar. 1+
</TABLE>
-57-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------
<S> <C>
10.77 Letter waiver and amendment to Credit, Security,
Guaranty and Pledge Agreement, dated June 9,
1997, by and between the Registrant and The
Chase Manhattan Bank, as Administrative Agent
and Fronting Bank. 1
10.78 Employment Agreement, dated July 31, 1995, by
and between the Registrant and James Keegan. 1+
10.79 Amendment no. 1 to the Credit, Security,
Guaranty and Pledge Agreement, dated June 30,
1997, by and between the Registrant's principal
operating subsidiaries, Trimark Pictures, Inc.
and Trimark Television, Inc., and The Chase
Manhattan Bank, as Administrative Agent and
Fronting Bank. 1
21.1 Subsidiaries of Registrant. 12
23.1 Consent of Price Waterhouse LLP. 1
27 Financial Data Schedule. 1
</TABLE>
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
1 Filed herewith.
2 Incorporated by reference to the identical
exhibit number in Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30,
1991.
3 Intentionally omitted.
4 Incorporated by reference to the identical
exhibit number in Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30,
1992.
5 Incorporated by reference to the identical
exhibit number in Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30,
1993.
6 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 31,
1993.
7 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1994.
</TABLE>
-58-
<PAGE>
ITEM 14. (CONTINUED)
<TABLE>
<S> <C>
8 Incorporated by reference to the identical
exhibit number in Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30,
1994.
9 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30,
1994.
10 Incorporated by reference to the identical
exhibit number in Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995
11 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1996.
12 Incorporated by reference to the identical
exhibit number in Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996
13 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30,
1996.
14 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 31,
1996.
15 Incorporated by reference to the identical
exhibit number in Registrant's Current Report on
Form 8-K Dated February 21, 1997.
16 Incorporated by reference to the identical
exhibit number in Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1997.
+ This is a management contract or compensatory
plan or arrangement.
</TABLE>
-59-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By: /s/ Mohammed Mark Amin
----------------------
Mohammed Mark Amin
Chairman of the Board
Date: September 26, 1997
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- ---------------------------- --------
<S> <C> <C>
/s/ Mohammed Mark Amin Chairman of the Board 09/26/97
- ------------------------- and Chief Executive Officer --------
Mohammed Mark Amin [Principal Executive Officer]
/s/ Johan A. Wassenaar Vice Chairman of the 09/26/97
- ------------------------- Board and Secretary --------
Johan A. Wassenaar
/s/ Gordon Stulberg Director 09/26/97
- ------------------------- --------
Gordon Stulberg
/s/ Tofigh Shirazi Director 09/26/97
- ------------------------- --------
Tofigh Shirazi
/s/ Matthew Saver Director 09/26/97
- ------------------------- --------
Matthew Saver
/s/ James E. Keegan Chief Financial and 09/26/97
- ------------------------- Accounting Officer, --------
James E. Keegan and Senior Vice President
- Finance [Principal
Financial and
Accounting Officer]
</TABLE>
-60-
<PAGE>
INDEX TO EXHIBIT
<TABLE>
<CAPTION>
Exhibit Method
Number Description of Filing
- ------- ------------------------------- ---------
<S> <C>
2.1 Asset Purchase Agreement between the Registrant,
Trimark Interactive, and Graphix Zone, Inc. dated
February 26, 1997. 15
3.1 Certificate of Incorporation of the Registrant, as
amended to date. 4
3.2 By-laws of the Registrant, as amended. 8
4.2 Form of Common Stock Certificate. 4
10.2 Stock Purchase and Option Agreement, dated as of
September 1, 1987, as amended, by and between
Vidmark, Inc., a California corporation and Said
(Sam) Pirnazar. 3+
10.4 Stock Purchase and Option Agreement, dated as of
September 1, 1989, by and between Vidmark, Inc., a
California corporation and Said (Sam) Pirnazar. 3+
10.9 Employment Agreement, dated as of January 1, 1990, by
and between Vidmark, Inc., a California corporation
and Barry Barnholtz. 3+
10.12 Consulting Agreement, dated as of January 1, 1990, by and
between Vidmark, Inc., a California corporation
and Johan A. Wassenaar. 3+
10.13 1990 Stock Option and Stock Appreciation Rights Plan
of the Registrant, as amended. 13+
10.15 Amendment to Stock Option Agreements, dated as of May
17, 1990, by and among the Registrant, Vidmark, Inc.,
a California corporation and Said (Sam) Pirnazar. 3+
10.22 Standard Office Lease - Gross, dated as of March 9,
1992, and amendments thereto, by and between Vidmark,
Inc., a California corporation and 2644 SM Partners,
a California limited partnership. 4
</TABLE>
-61-
<PAGE>
Index to Exhibits (Continued)
<TABLE>
<CAPTION>
Exhibit Method
Number Description of Filing
- ------- ------------------------------- ---------
<S> <C>
10.25 Non-Qualified Stock Option Agreement dated December
5, 1991, by and between the Registrant and Gordon
Stulberg. 4+
10.29 Non-Qualified Stock Option Agreement dated December
2, 1992, by and between the Registrant and Gordon
Stulberg. 5+
10.32 Directors' Stock Option Plan of the Registrant. 13+
10.35 Technicolor Videocassette, Inc. Fulfillment Agreement
with Trimark Pictures, Inc. dated as of March 1,
1994, by and between Trimark Pictures, Inc., a
California corporation and Technicolor Videocassette,
Inc. 7
10.36 Credit Agreement dated November 24, 1993, by and
between the Registrant's principal operating
subsidiaries, Trimark Pictures, Inc. and Trimark
Television, Inc., and Bank of America NT & SA and
Westdeustche Landesbank. 8
10.38 Employment Agreement, dated February 11, 1994, by and
between Trimark Pictures, Inc., a California
corporation and Timothy Swain. 8+
10.39 Employment Agreement, dated February 22, 1994, by and
between Trimark Pictures, Inc., a California
corporation and Sergio Aguero. 8+
10.41 Non-Qualified Stock Option Agreement dated March 31,
1994, by and between the Registrant and Timothy
Swain. 8+
10.42 Non-Qualified Stock Option Agreement dated March 31,
1994, by and between the Registrant and Sergio
Aguero. 8+
10.43 Non-Qualified Stock Option Certificate dated January
14, 1994, by and between the Registrant and Gordon
Stulberg. 8+
</TABLE>
-62-
<PAGE>
Index to Exhibits (Continued)
<TABLE>
<CAPTION>
Exhibit Method
Number Description of Filing
- ------- -------------------------------- ---------
<S> <C>
10.45 Non-Qualified Stock Option Certificate dated January
14, 1995, by and between the Registrant and Gordon
Stulberg. 10+
10.46 Non-Qualified Stock Option Certificate dated January
14, 1995, by and between the Registrant and Matthew
Saver. 10+
10.47 Non-Qualified Stock Option Certificate dated January
14, 1995, by and between the Registrant and Tofigh
Shirazi. 10+
10.48 Non-Qualified Stock Option Agreement dated October
11, 1994, by and between the Registrant and Barry
Barnholtz. 10+
10.50 Letter amendment to stock options agreements dated
August 10, 1995 by and between the Registrant and Said
(Sam) Pirnazar. 10+
10.51 Amendment No. 1 to credit agreement and waiver of
default. 10
10.52 Amendment No. 2 to credit agreement and waiver of
default, dated September 27, 1995. 11
10.53 Non-Qualified Stock Option Agreement, dated January
30, 1996 by and between the Registrant and Mark Amin.
11+
10.54 Amendment to Non-Qualified Stock Option Agreement,
dated January 30, 1996 by and between the Registrant
and Timothy Swain. 11+
10.55 Amendment to Non-Qualified Stock Option Agreement,
dated January 30, 1996 by and between the Registrant
and Barry Barnholtz. 11+
10.56 Amendment to stock option agreement dated March 31,
1994, by and between the Registrant and Sergio
Aguero. 12+
</TABLE>
-63-
<PAGE>
Index to Exhibits (Continued)
<TABLE>
<CAPTION>
Exhibit Method
Number Description of Filing
- ------- -------------------------------- ---------
<S> <C>
10.57 Non-Qualified Stock Option Agreement dated August 10,
1995, by and between the Registrant and Sergio
Aguero. 12+
10.58 Non-Qualified Stock Option Certificate dated January
14, 1996. by and between the Registrant and Matthew
Saver. 12+
10.59 Non-Qualified Stock Option Certificate dated January
14, 1996. by and between the Registrant and Tofigh
Shirazi. 12+
10.60 Non-Qualified Stock Option Certificate dated January
14, 1996. by and between the Registrant and Gordon
Stulberg. 12+
10.61 Employment Agreement dated July 1, 1996 between the
Registrant and Timothy Swain. 12+
10.62 Non-Qualified Stock Option Agreement dated July 2,
1996, by and between the Registrant and Timothy
Swain. 13+
10.63 Employment Agreement, dated August 30, 1995, by and
between Trimark Pictures, Inc., a California
corporation and Sergio Aguero, as amended to date.
14+
10.64 Amendment No. 3 to credit agreement, dated October
31, 1996. 14
10.65 Credit, Security, Guaranty and Pledge Agreement,
dated December 20, 1996, by and between the
Registrant's principal operating subsidiaries,
Trimark Pictures, Inc. and Trimark Television, Inc.,
and The Chase Manhattan Bank, as Administrative Agent
and Fronting Bank. 14
10.66 Pledge Agreement, dated February 28, 1997, by and
between Trimark Pictures Inc. and Johan Wassenaar and
Anne Wassenaar. 16+
</TABLE>
-64-
<PAGE>
Index to Exhibits (Continued)
<TABLE>
<CAPTION>
Exhibit Method
Number Description of Filing
- ------- ------------------------------- ---------
<S> <C>
10.67 Secured Promissory Note, dated February 28, 1997,
executed in favor of Trimark Pictures Inc. by Johan
Wassenaar. 16+
10.68 Letter waiver and amendment to Credit, Security,
Guaranty and Pledge Agreement, dated February 20,
1997, by and between the Registrant's principal
operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., and The Chase Manhattan
Bank, as Administrative Agent and Fronting Bank. 16
10.69 Non-Qualified Stock Option Certificate dated January
14, 1997, by and between the Registrant and Matthew
Saver. 16+
10.70 Non-Qualified Stock Option Certificate dated January
14, 1997, by and between the Registrant and Tofigh
Shirazi. 16+
10.71 Non-Qualified Stock Option Certificate dated January
14, 1997, by and between the Registrant and Gordon
Stulberg. 16+
10.72 Pledge Agreement, dated May 1, 1997, filed herewith
by and between Trimark Pictures Inc. electronically
and Mark Amin and Susan Amin. 1+
10.73 Secured Promissory Note, dated May 1, filed herewith
1997, by and between Trimark Pictures electronically
Inc. and Mark Amin. 1+
10.74 Employment Agreement, dated February filed herewith
21, 1995, by and between Trimark electronically
Pictures, Inc., a California
corporation and Don Gold. 1+
10.75 Addendum dated October 23, 1996 to filed herewith
Employment Agreement, dated February electronically
21, 1995, by and between Trimark
Pictures, Inc., a California
corporation and Don Gold. 1+
</TABLE>
-65-
<PAGE>
Index to Exhibits (Continued)
<TABLE>
<CAPTION>
Exhibit Method
Number Description of Filing
- ------- -------------------------------- ---------
<S> <C>
10.76 Letter amendment to Stock Purchase and filed herewith
Option Agreement, dated July 25, 1997, electronically
by and between the Registrant and Sam
Pirnazar. 1+
10.77 Letter waiver and amendment to Credit, filed herewith
Security, Guaranty and Pledge electronically
Agreement, dated June 9, 1997, by and
between the Registrant and The Chase
Manhattan Bank, as Administrative
Agent and Fronting Bank. 1
10.78 Employment Agreement, dated July 31, filed herewith
1995, by and between the Registrant electronically
and James Keegan. 1+
10.79 Amendment no. 1 to the Credit, filed herewith
Security, Guaranty and Pledge electronically
Agreement, dated June 30, 1997, by and
between the Registrant's principal
operating subsidiaries, Trimark
Pictures, Inc. and Trimark Television,
Inc., and The Chase Manhattan Bank, as
Administrative Agent and Fronting
Bank. 1
21.1 Subsidiaries of Registrant. 12
23.1 Consent of Price Waterhouse LLP. 1 filed herewith
electronically
27 Financial Data Schedule. 1 filed herewith
electronically
- -------------------------------------
1 Filed herewith.
2 Incorporated by reference to the identical exhibit
number in Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1991.
3 Incorporated by reference to the identical exhibit number in
Registrant's Form S-1 Registration Statement, No. 33-35053,
effective June 26, 1990.
4 Incorporated by reference to the identical exhibit
number in Registrant's Annual Report on Form 10-K
</TABLE>
-66-
<PAGE>
Index to Exhibits (Continued)
<TABLE>
<S> <C>
for the fiscal year ended June 30, 1992.
5 Incorporated by reference to the identical exhibit
number in Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993.
6 Incorporated by reference to the identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1993.
7 Incorporated by reference to the identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994.
8 Incorporated by reference to the identical exhibit
number in Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994.
9 Incorporated by reference to the identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
10 Incorporated by reference to the identical exhibit
number in Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995
11 Incorporated by reference to the identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
12 Incorporated by reference to the identical exhibit
number in Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996
13 Incorporated by reference to the identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
14 Incorporated by reference tothe identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1996.
15 Incorporated by reference to the identical exhibit
number in Registrant's Current Report on Form 8-K
Dated February 21, 1997.
16 Incorporated by reference to the identical exhibit
number in Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997.
+ This is a management contract or compensatory plan
or arrangement.
</TABLE>
-67-
<PAGE>
EXHIBIT 10.72
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT is made this 1st day of May, 1997, between Mark
Amin ("Amin") and Susan Amin (collectively, the "Pledgor") on the one hand, and
TRIMARK PICTURES, INC., a California corporation (the "Company") on the other
hand, with reference to the following facts:
Concurrently herewith, the Company is making a loan to Amin in the
aggregate principal amount of up to $750,000 evidenced by that certain Secured
Promissory Note dated of even date herewith (the "Note"), which Note is attached
hereto as Exhibit A and incorporated herein by reference as though set forth in
full. The Pledgor has agreed to pledge the collateral described herein to the
Company as collateral security for the repayment of the Note.
In consideration of the promises and covenants contained herein, and
in order to secure the Note, the parties hereto hereby agree as follows:
1. Pledge. For good and valuable consideration, the receipt of which
------
is hereby acknowledged, the Pledgor hereby pledges, hypothecates, assigns,
transfers, sets over and delivers unto the Company, and grants the Company a
security interest in, 230,000 shares of common stock of Trimark Holdings, Inc.
("Holdings") represented by Certificate No. V1295 (the "Shares")
<PAGE>
with attached stock powers duly endorsed by Amin in blank. The Company shall not
encumber or dispose of the Shares
except in accordance with the terms and provisions of this Pledge
Agreement.
2. Additional Security. In the event that at any time during the term
-------------------
of this Pledge Agreement the "current market value" of the Shares is not at
least equal to 200% of the then aggregate outstanding principal balance and
accrued but unpaid interest owed under the Note (the "Deficiency"), the Pledgor
agrees to promptly pledge and deliver to the Company and to grant the Company a
security interest in such additional number of shares of Holdings stock (or, if
the Pledgor does not then own sufficient shares of Holdings stock, such other
security deemed appropriate by the Company) having a current market value at
least equal to 200% of the Deficiency. Such additional shares shall be subject
to the same provisions of this Pledge Agreement as the Shares. The "current
market value" of the Shares shall be determined in compliance with (S)207.2(c)
of Regulation G of the Federal Reserve Board and to the extent consistent
therewith shall be computed by multiplying the number of Shares by the closing
price of Holdings common stock on the NASDAQ Stock Market on the business day
immediately prior to the day in question as reported in The Wall Street Journal,
or, if shares of Holdings
2
<PAGE>
common stock are not at such time quoted on the NASDAQ Stock Market, the closing
price or the average of the closing bid and asked prices in the over-the-counter
market as reported in The Wall Street Journal, or if not so reported, as
otherwise reported by the NASDAQ Stock Market or by the National Quotations
Bureau, Incorporated, or similar organization, or, if no such quotations are
available, the current market value as determined by the Company (whose
determination shall be conclusive).
3. Voting Right. So long as the Pledgor is not in default in the
------------
performance of any of the terms or conditions of this Pledge Agreement or the
Note, the Pledgor shall have all voting rights attaching to the Shares.
However, notwithstanding the foregoing, upon the occurrence and during the
continuance of any default by the Pledgor in the performance of any of the terms
of this Pledge Agreement or the Note, there shall become vested immediately in
the Company exclusive authority to exercise all voting rights relative to the
Shares.
4. Representations. The Pledgor hereby represents and warrants that
---------------
there are now, and during the term of this Pledge Agreement will be, no
restrictions upon his transfer of the Shares, other than under the securities
laws, state or federal, including without limitation, the Securities Act of
1933, as amended, and that the Pledgor has the right to pledge the Shares
3
<PAGE>
in accordance with the terms of this Pledge Agreement and the Note, free of any
other encumbrances or claims whatsoever.
5. Stock Adjustments. In the event that during the term of this
-----------------
Pledge Agreement any stock dividend, reclassification, adjustment,
recapitalization or any other change is declared or effected in the capital
structure of Holdings, or any distributions in property or otherwise are made on
or in respect of the Shares, whether resulting from any stock dividend,
reclassification, adjustment, recapitalization or any other change relative to
the Shares or received in exchange for the Shares, or any part thereof, or as a
result of any merger, consolidation, acquisition, or other exchange of assets,
all new, substituted or additional shares, or other securities, property or
distributions issued or received by the Pledgor by reason of any of the
foregoing occurrences shall be held by the Company under the terms of this
Pledge Agreement, and in the same manner as the Shares are being held hereunder.
6. Payment of Note. Upon payment of the Note in full and all accrued
---------------
but unpaid interest thereon, and when all of the terms and conditions of the
Note are satisfied, the Company shall deliver to the Pledgor the Shares, or such
portion thereof then being held by the Company hereunder, free and clear of any
lien of the Company.
4
<PAGE>
7. Default. In the event that the Pledgor defaults in the
-------
performance of any of the terms or conditions of this Pledge Agreement or of the
Note, and provided that the Company has given the Pledgor five (5) days' written
notice of such default and within such period the default has not been cured,
the Company shall have all of the rights and remedies as provided by the Uniform
Commercial Code then in force in the State of California. In order to effectuate
the foregoing in the circumstances in which the collateral consists of the
Shares, upon any uncured default by the Pledgor, the current market value of the
Shares (as determined in accordance with Paragraph 2 hereof) shall be computed
as of the close of business of the next business day following expiration of the
cure period. The Company shall retain such number of Shares having a current
market value equal to the outstanding principal balance of the Note and all
accrued but unpaid interest thereon, plus the amount of the expenses incurred by
the Company arising out of the default, including, but not limited to,
reasonable attorney's fees, and shall return the balance of the Shares to the
Pledgor. The Shares retained by the Company shall be reissued in the Company's
or Holdings' name and shall be held by the Company or Holdings as treasury stock
and shall thereafter not be subject to the provisions of this Pledge Agreement.
In the event that the
5
<PAGE>
current market value of the Shares is less than the outstanding principal
balance of the Note, accrued but unpaid interest thereon, plus the foregoing
expenses, the Pledgor shall remain liable to the Company for any such
deficiency.
8. Power of Attorney. The Pledgor hereby appoints the Company as the
-----------------
Pledgor's attorney-in-fact for the purposes of carrying out the provisions of
this Pledge Agreement, and taking any action and executing any instrument which
the Company may deem necessary or advisable to accomplish the purposes hereof,
which appointment is irrevocable and is coupled with an interest.
9. No Waiver. No failure on the part of the Company to exercise, and
---------
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy exclude any other further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
10. Termination. This Pledge Agreement shall terminate when the Note
-----------
and all interest accrued thereon have been paid in full, and when all of the
other terms and conditions of this Pledge Agreement and the Note have been fully
performed and satisfied.
6
<PAGE>
11. Binding Agreement; Assignment. This Pledge Agreement and the
-----------------------------
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and to the holders of all indebtedness secured
hereby and their respective heirs, successors and permitted assigns; provided,
however, that the Pledgor shall not be permitted to assign his rights in, or
obligations under, this Pledge Agreement or any other interest herein, or any
interest in the Shares, or any part thereof, or otherwise pledge, encumber or
grant any option with respect to the Shares, or any part thereof, or any other
property held by the Company as collateral security under this Pledge Agreement.
12. Law. This Pledge Agreement shall be construed in accordance with
---
and governed by the laws of the State of California.
13. No Representation. The execution of this Pledge Agreement by
-----------------
Susan Amin in no way constitutes an admission, acknowledgment or representation
by any party hereto that she has or may have (or hasn't or may not have) a
community property interest in the Shares.
14. Notices. All notices, consents, demands or other communications
-------
required or permitted to be given pursuant to this Pledge Agreement shall be in
writing and shall be deemed
7
<PAGE>
sufficiently given on (i) the day on which delivered personally or delivered by
fax (with prompt confirmation by mail) during a business day to the appropriate
location listed as the address below, or (ii) two (2) business days after the
posting thereof by United States registered or certified first class mail,
return receipt requested with postage and fees prepaid.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement on the date first above written.
PLEDGOR:
-----------------------------------
MARK AMIN
-----------------------------------
SUSAN AMIN
Address:
2644 30th Street
Santa Monica, CA 90405
COMPANY:
TRIMARK PICTURES, INC.
a California corporation
By:
-------------------------------
Its:
------------------------------
Address:
2644 30th Street
Santa Monica, CA 90405
Attn: Chief Financial Officer
9
<PAGE>
EXHIBIT 10.73
SECURED PROMISSORY NOTE
$750,000 May 1, 1997
Los Angeles, California
FOR VALUE RECEIVED, Mark Amin ("Maker") promises to pay to the order of
Trimark Pictures, Inc., a California corporation, ("Lender"), at its place of
business at 2644 30th Street, Santa Monica, California, the principal sum of
Seven Hundred Fifty Thousand Dollars ($750,000) or the sum of the aggregate
unpaid principal amount of all advances made by Lender to Maker shown on the
schedule attached hereto (loan balance), whichever is less, plus interest on the
unpaid principal balance at the weighted average cost of funds, as the same may
change from time to time, to the Lender under its Credit, Security, Guaranty and
Pledge Agreement dated as of December 20, 1996 with The Chase Manhattan Bank,
but in no event less than the applicable federal rate set forth in Section
1274(d) of the Internal Revenue Code of 1986, as amended, interest only to be
due and payable quarterly on the last day of March, June, September and December
of each year commencing on June 30, 1997 and continuing until June 30, 2000, at
which time the entire principal balance and all accrued and unpaid interest
thereon shall be due and payable.
Payment of such sums shall be in lawful currency of the United States of
America.
Maker reserves the privilege of prepaying this Note in full or in part at
any time, with interest to the time of payment but without payment of any
penalty or premium.
This Note is entitled to the benefits and subject to all of the terms and
conditions of that certain Pledge Agreement dated of even date herewith between
Maker and Lender ("Pledge Agreement").
Maker acknowledges, represents and warrants to Lender that no portion of
the proceeds of this Note will be used, directly or indirectly, whether
immediately, incidentally or ultimately (i) to purchase or carry any Margin
Stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock, or (ii) for any other purpose, in each case,
violative of or inconsistent with any of the provisions of any
<PAGE>
regulation of the Board of Governors of the Federal Reserve System.
The entire unpaid principal balance, together with all interest thereon,
shall, at the option of the holder hereof, become immediately due and payable on
the occurrence of any of the following events of default: (1) the failure to
make any payment under this Note within five (5) days of the due date for such
payment; (2) Maker defaults under the Pledge Agreement or breaches or defaults
upon any non-monetary obligation under this Note; (3) Maker makes an assignment
for the benefit of creditors or petitions or applies for the appointment of a
trustee or receiver or commences any proceeding under any bankruptcy,
insolvency, or similar law of any jurisdiction, now or hereafter in effect, or
shall be adjudicated bankrupt or insolvent; or (4) such a petition or
application is filed, or such a proceeding is commenced, against Maker, and
Maker indicates his approval thereof, consents thereto or acquiesces therein, or
an order is entered appointing any such trustee or receiver or approving a
petition in any such proceeding, and such order remains in effect for more than
30 days, whether or not consecutive.
Maker waives presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note, assents to any extension or postponement of the time
of payment or any other indulgence, and/or to the addition or release of any
other party or person primarily or secondarily liable.
In the event of commencement of suit to enforce payment of this Note, Maker
agrees to pay such attorneys' fees and costs of collection as the court may
adjudge reasonable.
No delay or omission on the part of the holder hereof in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Note. A waiver on any one occasion shall not be construed as a bar
to or waiver of any such right and/or remedy on any further occasion.
As herein used, the word "holder" shall mean the payee or other endorsee of
this Note, who is in possession of it.
MAKER:
____________________________
Mark Amin
<PAGE>
SCHEDULE OF ADVANCES
--------------------
<TABLE>
<CAPTION>
PAYMENTS Unpaid
Principal
Amount of Principal Balance of Notation
Date of --------- --------- ---------- --------
Advance Advance interest Note Made By
--------- ------- -------- ---- -------
<S> <C> <C> <C> <C>
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
- --------------- ------------------- ---------------------- -------------------- ----------------------
</TABLE>
<PAGE>
EXHIBIT 10.74
February 21, 1995
Don Gold
5401 Softwind Way
Agoura Hills, CA 90401
Dear Don:
The purpose of this letter is to confirm the terms of your employment with
Trimark Pictures, Inc.
1. BASE SALARY: A base salary of $125,000.00 effective from January 3,
1995$137,000.00 effective January 3, 1996 and $150,000.00 effective January
3, 1997.
2. BONUS: You will receive yearly bonuses as described in attachment "A". In
addition, you will be eligible to receive a share of any fiscal year end
executive bonus pool.
3. TITLE: Vice President of Sell-Thru.
4. RENEWAL: You agree that for the 90 day period commencing 90 days prior to
the conclusion of the above mentioned term, at Trimark's request, you will
enter into exclusive, good faith negotiations regarding the renewal of this
agreement. If you and Trimark are unable to reach an agreement there is no
further obligation by either party.
6. STOCK OPTIONS: You will be granted the right to buy 2500 shares of the
common stock of Trimark Pictures. All shares shall vest January 3, 1998.
If a majority of control in the company is sold, then all of your stock
options become fully vested. All stock option rights are subject to the
terms of Trimark's standard stock option agreement to be subsequently
executed.
7. You hereby expressly agree that while employed by Trimark Pictures you will
not disclose any confidential matters of Trimark Prior to, during or after
your employment. In addition, you agree that Trimark shall own all rights
of
<PAGE>
every kind and character throughout the universe, in perpetuity to any
material and/or ideas suggested or submitted by you or suggested or
submitted to you by a third party. You agree also that Trimark shall own
all other results and proceeds of your services during your employment.
8. You will be eligible for all Employee Benefits, Medical, Dental, Vision and
Life and 401(k) per Trimark's standard benefit program.
9. If you are terminated by Trimark Pictures, Inc. for any reason other than
cause, Trimark Pictures will pay the remaining contract amount, pursuant to
regular payment schedule, throughout the Term until such time as you shall
become otherwise employed in a job of equal or greater compensation,
otherwise Trimark Pictures shall make up the difference through the
duration of the contract. You will also be eligible to receive all
Employee Benefits, Medical, Dental, Vision, and Life, and 401(k) per
Trimark's standard benefit program through the duration of the contract
until such time as you become otherwise employed with equivalent Employee
Benefits.
This Agreement shall be binding and supersedes any and all other agreements,
either oral or in writing. Any modification of this agreement will be
effective only if signed by Trimark and you.
If the above meets with your approval, please countersign this letter and return
the fully executed letter to me.
Sincerely, AGREED TO AND ACCEPTED BY:
-----------------------------
Richard Reisberg Don Gold
President & COO Date:
------------------------
<PAGE>
EXHIBIT 10.75
ADDENDUM TO CONTRACT
10/23/96
Dear Don Gold:
This letter is to confirm the terms of your addendum to your contract dated
February 21, 1995 and your employment with Trimark Pictures, Inc.
TITLE: Senior Vice President, Sales & Marketing, Domestic Home Video
- ------
BASE SALARY: An annual base salary of $143,000 continued from your salary
- -----------
increase on July 15, 1996 through January 2, 1997; Increase to $156,000 annually
effective from January 3, 1997 up to and including January 3, 1998.
BONUS: You will receive your "Performance Bonus" based on the attached
- -----
schedule, as well as the "Sell-Thru" Bonus Program outlined in your original
contract dated 10/07/96, which will remain in effect through the end of Term.
(Note: Beginning July 15, 1996 through January 2, 1997, you will be paid a pro-
rated amount of the attached schedule for your Performance Bonus.) From January
3, 1997 to January 3, 1998 the bonus will be paid over a calendar year, per the
attached schedules.
STOCK OPTIONS: Trimark will request that the Option Committee authorize an
- -------------
additional 3,000 shares of company stock to vest over a three (3) year period
beginning July 15, 1997.
This agreement shall be binding and implemented as an addendum to your original
contract as outlined above.
Sincerely,
Tim Swain
Executive Vice President
<PAGE>
If the above meets with your approval, please countersign this letter and return
the fully executed letter to me.
AGREED AND ACCEPTED BY:
- ------------------------- --------------------------------
Donald B. Gold Date
###-##-####
<PAGE>
EXHIBIT 10.76
July 25, 1997
Sam Pirnazar
c/o TDC
P.O. Box 219
Manhattan Beach, CA 90267
Dear Sam,
This letter sets forth the terms of Trimark Holdings' agreement to purchase your
options to acquire 20,000 shares of Trimark Holdings stock (out of your
remaining options to purchase 52,123 shares) pursuant to the Stock Purchase and
Option Agreement dated September 1, 1989. The aggregate purchase price shall be
$58,200.00 Trimark Holdings confirms that the expiration date for the remaining
(32,123) is September 1, 1998.
In exchange, you agree not to exercise or sell the remaining options for four
months from the date of this agreement. Furthermore you agree to perform
consulting services for Trimark Holdings at the rate of $40.00 per hour, subject
to your availability. Such consulting services would be in the area of helping
the company with cost reduction, etc.
Please sign and date below to indicate your acceptance of this agreement.
Sincerely, Agreed To and Accepted By
------------------------------
Mark Amin Sam Pirnazar Date
MA/jg
<PAGE>
EXHIBIT 10.77
as of June 9, 1997
Trimark Pictures, Inc.
Trimark Television, Inc.
2644 30th Street
Santa Monica, CA 90405
Dear Sirs:
Reference is hereby made to that certain Credit, Security, Guaranty and
Pledge Agreement, dated as of December 20, 1996 (as the same has been, and may
be, amended, supplemented or otherwise modified, renewed or replaced from time
to time, the "Credit Agreement"), among Trimark Pictures, Inc. and Trimark
Television, Inc. (the "Borrowers"), the Guarantors referred to therein, the
Lenders referred to therein and The Chase Manhattan Bank, as Administrative
Agent and Fronting Bank. Capitalized terms used herein and not otherwise
defined are used herein as defined in the Credit Agreement.
The Borrowers have requested that the Lenders waive the obligation of the
Borrowers to comply with the EBITDA ratio covenant set forth in Section 6.19(b)
of the Credit Agreement until June 23, 1997.
Each of the undersigned hereby waives the obligation of the Borrowers to
comply with the covenant set forth in Section 6.19(b) of the Credit Agreement
until June 23, 1997.
By execution hereof, the Borrowers hereby represent and warrant that as of
the date hereof, there exists no Default or Event of Default other than the
failure of the Borrowers to comply with the covenant set forth in Section
6.19(b) of the Credit Agreement.
This waiver and amendment may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together, shall
constitute one and the same instrument.
This waiver shall become effective when the Administrative Agent shall have
received executed counterparts of this waiver and amendment which, when taken
together, bear the signatures of all the Lenders and all the Credit Parties.
<PAGE>
This waiver and amendment shall not be construed as extending to any other
matter, similar or dissimilar, or entitling the Credit Parties to any future
waivers or amendments regarding similar matters or otherwise.
Except to the extent expressly set forth above, this letter does not
constitute a waiver or modification of any provision of the Credit Agreement or
a waiver of any Default or Event of Default, whether or not known to any of the
Agents or the Lenders. Except as expressly modified herein, all terms of the
Credit Agreement remain in full force and effect.
THIS WAIVER AND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent
By:___________________________
Name:
Title:
CITY NATIONAL BANK
By:___________________________
Name:
Title:
COMERICA BANK-CALIFORNIA
By:___________________________
Name:
Title:
FIRST HAWAIIAN BANK
By:___________________________
Name:
Title:
<PAGE>
IMPERIAL BANK
By:___________________________
Name:
Title:
SILICON VALLEY BANK
By:___________________________
Name:
Title:
THE SUMITOMO TRUST & BANKING
CO., LTD., NEW YORK BRANCH
By:___________________________
Name:
Title:
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:___________________________
Name:
Title:
DE NATIONALE INVESTERINGSBANK
N.V.
By:___________________________
Name:
Title:
AGREED TO BY:
TRIMARK PICTURES, INC.
TRIMARK TELEVISION, INC.
TRIMARK HOLDINGS, INC.
TRIMARK MUSIC
CHEAP DATE, INC.
WRITERS ON THE WAVE
PURPLE TREE PRODUCTIONS, INC.
LOVING GUN PRODUCTIONS, INC.
TRIMARK INTERACTIVE
By:___________________________
Name:
Title: Authorized Signatory
for each of the
foregoing
<PAGE>
EXHIBIT 10.78
July 31, 1995
Dear James Keegan,
The purpose of this letter is to confirm the terms of your employement with
Trimark Holdings, Inc.
1. TITLE: Senior Vice President, Chief Financial Officer
2. TERM: 3 years. From July 1, 1995 to June 30, 1998
3. BASE SALARY: A base salary of $152,000.00 effective from July 1, 1995,
$165,000.00 effective July 1, 1996, and $177,500 effective July 1, 1997.
4. BONUS: You will be eligible to participate in the fiscal year end
executive bonus pool per management discretion.
5. RENEWAL: You agree that for the period commencing 30 days prior to the
conclusion of the of the above mentioned term, at Trimark's request, you
will enter into exclusive negotiations regarding the renewal of this
agreement. If at the end of the above mentioned term you and Trimark are
unable to reach an agreement regarding the renewal of your employment with
Trimark, your employment with Trimark shall continue on a month to month
basis at the same terms contained in this agreement unless terminated by
Trimark or you upon 30 days prior written notice.
6. You hereby expressly agree that while employed by Trimark Holdings you will
not disclose any confidential matters of Trimark prior to, during or after
your employment. In addition, you agree that Trimark shall own all rights
of every kind and character throughout the universe, in perpetuity of any
material and/or ideas suggested or submitted by you or suggested or
submitted to you by a third party. You agree also that Trimark shall own
all other results and proceeds of your services during your employment.
<PAGE>
7. You will be eligible for all Employee Benefits, Medical, Dental, Vision and
Life and 401(k) per Trimark's standard Benefit program.
8. If you are terminated by Trimark Holdings, Inc. for any reason other than
cause, a severance amount equal to 50% of the balance of the contract at
the time of termination will be paid to you by Trimark which will relieve
each party of any obligations to each other. Notwithstanding the
foregoing, if control changes by acquisition or merger you will receive
100% of the balance of the contract.
This Agreement shall be binding and supersedes any and all other agreements,
either oral or in writing. Any modification of this agreement will be effective
only if signed by Trimark and you.
If the above meets with your approval, please countersign this letter and return
the fully executed letter to me.
Sincerely, AGREED TO AND ACCEPTED BY:
--------------------------
Mark Amin James Keegan
Chairman Date:
---------------------
<PAGE>
EXHIBIT 10.79
AMENDMENT NO. 1 (the "Amendment") dated as of June 30,
1997 to the CREDIT, SECURITY, GUARANTY AND PLEDGE
AGREEMENT, dated as of December 20, 1996 (as amended by
the Waiver and Amendment dated as of February 20, 1997,
and as amended, supplemented or otherwise modified,
renewed or replaced from time to time, the "Credit
Agreement"), among TRIMARK PICTURES, INC., a California
corporation, and TRIMARK TELEVISION, INC., a Delaware
corporation (each a "Borrower" and together, the
"Borrowers"), the Guarantors named herein, the Lenders
referred to herein, THE CHASE MANHATTAN BANK, a New
York banking corporation, as Agent (the "Administrative
Agent") for the Lenders and THE CHASE MANHATTAN BANK as
Fronting Bank (the "Fronting Bank").
INTRODUCTORY STATEMENT
----------------------
The Borrowers and the Guarantors have requested that the Lenders amend
Sections 6.14 and 6.18 of the Credit Agreement, delete Section 6.19 from the
Credit Agreement and add certain additional Acceptable Obligors to Schedule 2 of
the Credit Agreement. The Lenders are willing to comply with such request on
the terms and subject to the conditions hereinafter set forth.
Accordingly, the parties hereto hereby agree as follows:
I. Section Defined Terms. All capitalized terms not otherwise defined
-------------
in this Amendment are used herein as defined in the Credit Agreement.
I. Section Amendment to the Credit Agreement. Subject to the
---------------------------------
satisfaction of the conditions in Section 3 hereof, the Credit Agreement is
hereby amended effective as of the date hereof, as follows:
<PAGE>
(1) The definition of "Consolidated Total Liabilities" is hereby deleted
from the Credit Agreement in its entirety.
(1) The definition of "Off-Balance Sheet Commitments" is hereby deleted
from the Credit Agreement in its entirety.
(1) Article 1 of the Credit Agreement is hereby amended by adding the
following definition in the appropriate alphabetical sequence:
"Product Acquisition Commitments" shall mean all commitments
-------------------------------
of the Credit Parties for the acquisition of items of Product,
including cash flow commitments, negative pick-up obligations and
print and advertising commitments, regardless of whether or not,
pursuant to GAAP, reflected on the Consolidated balance sheet of the
Parent and its Consolidated Subsidiaries; provided, however, that such
obligations for print and advertising commitments shall not be
included in Product Acquisition Commitments until principal
photography has commenced for the item of Product to which each such
commitment relates."
(1) Section 5.1(c) of the Credit Agreement is hereby amended and
restated to read as follows:
"Simultaneously with the delivery of the statements referred to
in paragraphs (a) and (b) of this Section 5.1, a certificate of an
Authorized Officer of the Parent, on behalf of the Parent, in form and
substance satisfactory to the Administrative Agent (i) stating whether
or not such Authorized Officer has knowledge, after due inquiry, of
any condition or event which would constitute an Event of Default or
Default has occurred and, if so, specifying each such condition or
event and the nature thereof, (ii) demonstrating in reasonable detail
compliance with the provisions of Sections 6.14 through 6.18 and 6.22
hereof and (iii) certifying that all filings required under Section
5.8 hereof have been made and listing each such filing that has been
made since the date of the last certificate delivered in accordance
with this Section 5.1(c);"
<PAGE>
(1) Section 6.14 of the Credit Agreement is hereby amended and
restated to read as follows:
"Permit Consolidated Tangible Net Worth at the end of any quarter to
be less than the sum of $19,000,000 plus 100% of net new equity
invested and 50% of net earnings, if any, for each fiscal year ending
after June 30, 1996 and prior to the date as of which compliance is
being determined."
(1) Section 6.18 of the Credit Agreement is hereby amended and
restated to read as follows:
"Section 6.18 Consolidated Tangible Net Worth Ratio.
-------------------------------------
Permit the ratio of (i) the aggregate amount of all Indebtedness of
the Parent and its Consolidated Subsidiaries, consolidated in
accordance with GAAP, plus 100% of Product Acquisition Commitments of
the Parent and its Consolidated Subsidiaries that support financings
provided by the Lenders, plus 110% of all other Product Acquisition
Commitments of the Parent and its Consolidated Subsidiaries, less the
present value of related Off-Balance Sheet Receivables (but not more
than the related portion of Product Acquisition Commitments), to (ii)
Consolidated Tangible Net Worth to be greater than 3.5 to 1 at any
time."
(1) Section 6.19 of the Credit Agreement is hereby amended in its
entirety to read "Not Used".
(1) Schedule 2 of the Credit Agreement is hereby amended by adding
under the heading "Acceptable Domestic Account Debtors (85%)" the following
Acceptable Domestic Account Debtor and corresponding Allowable Amount in the
appropriate numeric sequence:
All American Communications 2,000,000
(1) Schedule 2 of the Credit Agreement is hereby amended by adding
under the heading "Acceptable Foreign Account Debtors (75%)" the following
Acceptable Foreign Account Debtors
<PAGE>
and corresponding territories and Allowable Amounts in the appropriate numeric
sequence:
Foxton Germany 900,000
Televisa, S.A. Mexico 500,000
Pony Canyon Japan 400,000
Golden Harvest Taiwan 300,000
Mongkol Cinema Thailand 300,000
I. Section Conditions to Effectiveness. The effectiveness of this
---------------------------
Amendment is subject to the satisfaction in full of the following conditions
precedent.
(1) The Administrative Agent shall have received executed
counterparts of this Amendment, which, when taken together, bear the
signatures of each party hereto;
(1) An amendment fee in the amount of .125% of the Commitment of
each Lender shall have been paid to the Administrative Agent on behalf
of each Lender.
(1) All legal matters in connection with this Amendment shall be
reasonably satisfactory to Morgan, Lewis & Bockius LLP, counsel for
the Administrative Agent.
I. Section Representations and Warranties. Each of the Credit Parties
------------------------------
hereby represents, warrants and acknowledges to the Administrative Agent (on
behalf of itself, Fronting Bank and the Lenders) that:
(1) Their respective obligations to the Lenders under the Credit
Agreement remain in full force and effect.
(1) The representations and warranties contained in the Credit
Agreement and in the other Fundamental Documents are true and correct
in all material respects on and as of the date hereof as if such
representations and warranties had been
<PAGE>
made on and as of the date hereof (except to the extent such
representations and warranties expressly relate to as an earlier
date).
(c) After giving effect hereto, each of the Credit Parties is in
compliance with all the terms and provisions set forth in the Credit
Agreement and the other Fundamental Documents and no Default or Event
of Default has occurred or is continuing under the Credit Agreement or
any other Fundamental Document.
(1) The acknowledgments, representations and warranties in this
Section 3 have been a material inducement for the Lenders to agree to
enter into this Amendment, (ii) the Lenders are relying on such
acknowledgments, representations and warranties, and (iii) the Lenders
would not have entered into this Amendment without such
acknowledgments, representations and warranties.
I. Section Full Force and Effect. Except as expressly set forth
---------------------
herein, this Amendment does not constitute a waiver or modification of any
provision of the Credit Agreement or a waiver of any Default or Event of Default
under the Credit Agreement, in either case whether or not known to the Lenders.
Except as expressly amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with the provisions thereof on the date hereof.
As used herein, the terms "Credit Agreement", "this Agreement", "herein",
"hereafter", "hereto", "hereof", and words of similar import, shall, unless the
context otherwise requires, mean the Credit Agreement as amended by this
Amendment. References to the terms "Agreement" or "Credit Agreement" appearing
in the Exhibits or Schedules hereto or to the Credit Agreement, shall, unless
the context otherwise requires, mean the Credit Agreement as amended by this
Amendment.
I. SECTION APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
--------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WHICH ARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW
YORK.
I. Section Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall
<PAGE>
constitute as an original, but all of which when taken together shall constitute
but one instrument.
I. Section Expenses. The Borrowers agree to pay all reasonable out-of-
--------
pocket expenses incurred by the Administrative Agent in connection with the
preparation, execution, delivery, performance or enforcement of this Amendment,
the Credit Agreement or the other Fundamental Documents and any other
documentation contemplated hereby or thereby, including, but not limited to, the
reasonable fees and disbursements of external legal counsel for the
Administrative Agent and the allocated costs and charges of its internal legal
counsel.
I. Section Headings. The headings of this Amendment are for the
--------
purposes of reference only and shall not affect the construction of, or be taken
into consideration in interpreting, this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the date and year
first written above.
TRIMARK PICTURES, INC.
TRIMARK TELEVISION, INC.
TRIMARK HOLDINGS, INC.
TRIMARK MUSIC
CHEAP DATE, INC.
WRITERS ON THE WAVE
PURPLE TREE PRODUCTIONS, INC.
LOVING GUN PRODUCTIONS, INC.
TRIMARK INTERACTIVE
By____________________________
Name:
Title: Authorized Signatory
for each of the foregoing
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent
By:___________________________
Name:
Title:
CITY NATIONAL BANK
By:___________________________
Name:
Title:
COMERICA BANK-CALIFORNIA
By:___________________________
Name:
Title:
FIRST HAWAIIAN BANK
By:___________________________
Name:
<PAGE>
Title:
IMPERIAL BANK
By:___________________________
Name:
Title:
SILICON VALLEY BANK
By:___________________________
Name:
Title:
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH
By:___________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:___________________________
Name:
Title:
DE NATIONALE INVESTERINGSBANK N.V.
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the prospectus
constituting part of the Registration Statements on Form S-8 (No. 33-44805, No.
33-72504 and 33-80637) of Trimark Holdings, Inc. of our report dated September
18, 1997 appearing on page 33 of this Form 10-K.
PRICE WATERHOUSE LLP
Century City, California
September 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 3,665
<SECURITIES> 0
<RECEIVABLES> 27,134
<ALLOWANCES> 4,010
<INVENTORY> 650
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,857
<DEPRECIATION> 2,049
<TOTAL-ASSETS> 90,223
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 57,700
0
0
<COMMON> 5
<OTHER-SE> 20,204
<TOTAL-LIABILITY-AND-EQUITY> 90,223
<SALES> 63,165
<TOTAL-REVENUES> 63,165
<CGS> 53,421
<TOTAL-COSTS> 53,421
<OTHER-EXPENSES> 11,096
<LOSS-PROVISION> 321
<INTEREST-EXPENSE> 1,934
<INCOME-PRETAX> (3,523)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,523)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,523)
<EPS-PRIMARY> (0.84)
<EPS-DILUTED> (0.84)
<FN>
<F1>IN ACCORDANCE WITH INDUSTRY PRACTICE, THE COMPANY PREPARES AN UNCLASSIFIED
BALANCE SHEET.
</FN>
</TABLE>
