<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended MARCH 31, 1998 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)
(310) 314-2000
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
As of May 11, 1998, 4,182,627 shares of Trimark Holdings, Inc. common stock were
outstanding, excluding shares held by Trimark Holdings, Inc. as treasury
stock.
1
<PAGE>
TRIMARK HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets at March 31, 1998
and June 30, 1997 3
Consolidated Statements of Operations - Nine
months and three months ended March 31, 1998
and 1997 4
Consolidated Statements of Cash Flows - Nine
months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-17
Item 3. Quantitative and Qualitative not
Disclosures about Market Risk applicable
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
----------------------------------------
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, June 30,
Assets 1998 1997
---------- ----------- ----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,993 $ 3,665
Accounts receivable, less allowances of
$6,058 and $4,010, respectively 24,713 23,124
Film costs, net (Note 2) 62,061 57,293
Deferred marketing costs 1,944 1,696
Inventories, net 898 650
Property and equipment at cost, less accumulated
depreciation of $2,325 and $2,049, respectively 790 808
Due from officers 981 662
Other assets 2,309 2,325
------- -------
$95,689 $90,223
======= =======
Liabilities and Stockholders' Equity
----------------------------------------
Revolving line of credit $61,750 $57,700
Accounts payable and accrued expenses 10,869 7,575
Minimum guarantees and royalties payable 5,813 3,391
Deferred income 1,266 1,283
Income taxes payable 43 65
------- -------
Total liabilities 79,741 70,014
------- -------
Commitments and contingencies (Note 3) -- --
------- -------
Stockholders' equity:
Common stock, $.001 par value. Authorized
20,000,000 shares; 5,134,827 shares issued
at March 31, 1998 and 5,099,081 shares
issued at June 30, 1997 5 5
Additional paid in capital 15,588 15,474
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding -- --
Retained earnings 4,785 9,160
Less treasury shares, at cost - 952,200 shares
and 952,200 shares (4,430) (4,430)
------- -------
Stockholders' equity 15,948 20,209
------- -------
$95,689 $90,223
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------
(Amounts in Thousands, Except (Loss) Earnings Per Common Share)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
----------------------- ---------------------
1998 1997 1998 1997
---------- ---------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Net revenues $62,163 $44,127 $24,618 $13,632
Film costs and distribution expenses 53,200 36,834 19,284 9,952
------- ------- ------- -------
Gross profit 8,963 7,293 5,334 3,680
------- ------- ------- -------
Operating expenses:
Selling 5,536 5,043 2,005 1,824
General and administrative 3,660 3,285 1,193 1,158
Bad debt 1,000 295 852 72
------- ------- ------- -------
10,196 8,623 4,050 3,054
------- ------- ------- -------
Operating (loss) earnings (1,233) (1,330) 1,284 626
Other (income) expenses:
Interest expense 3,257 1,122 1,166 555
Interest and investment income (115) (62) (35) (13)
------- ------- ------- -------
3,142 1,060 1,131 542
------- ------- ------- -------
(Loss) earnings before income taxes (4,375) (2,390) 153 84
Income taxes -- -- -- --
------- ------- ------- -------
Net (loss) earnings $(4,375) $(2,390) $ 153 $ 84
======= ======= ======= =======
Weighted average number of common shares (Note 5):
Basic 4,183 4,240 4,183 4,220
Diluted 4,183 4,240 4,192 4,244
======= ======= ======= =======
Net (loss) earnings per common share (Note 5):
Basic $ (1.05) $ (0.56) $ 0.04 $ 0.02
Diluted $ (1.05) $ (0.56) $ 0.04 $ 0.02
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Operating activities:
Net loss $ (4,375) $ (2,390)
Adjustments to reconcile net loss to
net cash used by operating activities:
Film amortization 37,304 27,428
Depreciation and other amortization 276 219
Provision for returns and bad debt 2,048 280
Provision for inventory obsolescence 3 (494)
Change in operating assets and liabilities:
Increase in accounts receivable (3,637) (3,393)
Additions to film costs (42,072) (53,122)
Increase in deferred marketing costs (248) (280)
(Increase) decrease in inventories (251) 536
Increase in notes receivable from officers (319) --
Decrease (increase) in other assets 16 (2,174)
Increase in accounts payable and
accrued expenses 3,294 7,493
Increase (decrease) in minimum guarantees and
royalties payable 2,422 (1,465)
(Decrease) increase in income taxes payable (22) 309
Decrease in deferred income (17) (1,000)
-------- --------
Net cash used by operating activities (5,578) (28,053)
-------- --------
Investing activities:
Acquisition of property and equipment (258) (187)
-------- --------
Net cash used by investing activities (258) (187)
-------- --------
Financing activities:
Net increase in revolving line of credit 4,050 29,000
Exercise of stock options 114 75
Purchase of treasury stock -- (702)
-------- --------
Net cash provided by financing activities 4,164 28,373
-------- --------
(Decrease) increase in cash and cash equivalents (1,672) 133
Cash and cash equivalents at beginning of period 3,665 344
-------- --------
Cash and cash equivalents at end of period $ 1,993 $ 477
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
TRIMARK HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - THE COMPANY:
- ---------------------
The consolidated financial statements of Trimark Holdings, Inc. and subsidiaries
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
financial statements should be read in conjunction with the more detailed
financial statements and related footnotes filed with the Form 10-K for the year
ended June 30, 1997. Significant accounting policies used by the Company are
summarized in Note 2 to the June 30, 1997 financial statements.
In the opinion of management, all adjustments required for a fair presentation
of the financial position as of March 31, 1998 and the results of operations and
cash flows for the periods ended March 31, 1998 and March 31, 1997 have been
made and all adjustments were of a normal and recurring nature. Operating
results for the nine and three month periods are not necessarily indicative of
the operating results for a full year.
NOTE 2 - FILM COSTS:
- --------------------
Film costs, net of amortization, consist of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Released $46,286 $32,159
Completed not released 5,412 7,045
In process and development 10,363 18,089
------- -------
$62,061 $57,293
------- -------
</TABLE>
6
<PAGE>
NOTE 3 - COMMITMENTS & CONTINGENCIES:
- -------------------------------------
The Company has entered into certain agreements which provide for royalty
advances and promotional and advertising commitments totaling $12.5 million. If
the conditions to these agreements are not met by the licensors, the Company may
withdraw from the arrangements. These commitments extend to January 1999.
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- -----------------------------------------------------------
Cash paid during the nine month period for:
<TABLE>
<CAPTION>
March 31,
1998 1997
------------ ------------
(in thousands)
<S> <C> <C>
Interest $3,662 $1,582
Income taxes 279 376
</TABLE>
NOTE 5 - NET (LOSS) EARNINGS PER COMMON SHARE:
- ----------------------------------------------
Basic (loss) earnings per common share amounts are based on the weighted average
number of common shares outstanding during the respective periods. Dilutive
(loss) earnings per common share amounts are based on the weighted average
common shares outstanding during the period and shares assumed issued upon
conversion of stock options when the effect of such conversions would have been
dilutive to net (loss) earnings. There is no assumed conversion of stock
options for the nine months ended March 31, 1998 and 1997 as the effect would be
anti-dilutive.
Prior period amounts have been restated to conform to SFAS No. 128. The table
below presents a reconciliation of weighted average shares used in the
calculation of basic and diluted net (loss) earnings per common share:
<TABLE>
<CAPTION>
Nine months ended Three months ended
March 31, March 31,
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
Basic shares - weighted
average of common shares
outstanding 4,183 4,240 4,183 4,220
Additional shares assuming
conversions of stock
options -- -- 9 24
------------ ------------ ------------ ------------
Diluted shares 4,183 4,240 4,192 4,244
------------ ------------ ------------ ------------
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES:
<TABLE>
<CAPTION>
Nine months ended Three months ended
March 31, March 31,
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
Domestic:
Home video distribution $37,019 $26,161 $15,172 $ 8,431
Theatrical distribution 7,687 2,027 2,664 1,977
Television distribution 7,743 4,389 3,222 979
Foreign:
All media 9,714 10,185 3,560 1,947
Interactive:
All media -- 1,365 -- 298
------------ ------------ ------------ ------------
$62,163 $44,127 $24,618 $13,632
------------ ------------ ------------ ------------
</TABLE>
Net revenues for the nine months and quarter ended March 31, 1998 increased
$18.0 million or 40.9% and $11.0 million or 80.6%, respectively, compared with
the same periods in fiscal 1997. The increase for the nine month period was
primarily due to increases in net revenues from domestic home video, theatrical
and television distribution of $10.9 million, $5.7 million and $3.4 million,
respectively, partially offset by decreases in net revenues from interactive and
foreign distribution of $1.4 million and $471,000, respectively. The increase
in domestic home video net revenues was primarily due to the initial home video
distribution of the wide theatrically released films "Sprung" (October 1997) and
"Eve's Bayou" (March 1998, the rental title with the largest shipments in
Company history), without any comparable video releases of wide theatrical films
in the nine months ended March 31, 1997. The increase in revenues from domestic
theatrical distribution was primarily due to the release of two wide theatrical
films in the current year period, "Eve's Bayou" in October 1997 and "Star Kid"
(aka "Warrior of Waverly Street") in January 1998, compared to one wide
theatrical release, "Meet Wally Sparks" in the nine months ended March 31, 1997.
The increase in domestic television net revenues was primarily due to the
releases in the current nine month period of the made for cable television
movies "Trucks" and "The Colony" as well as the cable debut of "Meet Wally
Sparks." "Trucks" and "The Colony" are
8
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
part of the Company's strategic decision to increase production and acquisition
of made for television product. The comparable nine month period ending March
31, 1997 included the HBO premieres of "The Dentist" and "Crossworlds."
Interactive revenues decreased due to the Company's decision to exit the
interactive market and related sale in March 1997 of substantially all assets of
Trimark Interactive to an unrelated independent interactive publisher. The
Company does not expect any significant future interactive revenues. The
decrease in foreign distribution revenues was primarily due to the large
advances generated in the fiscal 1997 period by "Star Kid" without any film
generating comparable advances in the fiscal 1998 period. In the nine months
ended March 31, 1998, seven (7) motion pictures, "A Kid in Aladdin's Palace,"
"Chairman of the Board," "Eve's Bayou," "Eye of God," "The Colony," "Trucks" and
"My Teacher's Wife" were initially released into the foreign market. In the same
time period in fiscal 1997 three (3) motion pictures "Leprechaun 4," "Never
Ever" (aka "Circle of Passion") and "Star Kid" were initially released.
The increase in net revenues for the quarter ended March 31, 1998 was primarily
due to increases in net revenues from domestic home video, domestic television,
foreign all media and domestic theatrical distribution of $6.7 million, $2.2
million, $1.6 million and $687,000, respectively, partially offset by decreases
in net revenues from interactive distribution of $298,000. The increase in
domestic home video net revenues was primarily due to the initial home video
distribution in March 1998 of the theatrically released film "Eve's Bayou"
without any comparable video release in the three months ended March 31, 1997.
The increase in domestic television net revenues was primarily due to the cable
debut in January 1998 of "Meet Wally Sparks" and the release in March 1998 of
the made for cable television movie "The Colony" on The USA Network's Sci-Fi
Channel. The comparable time period in fiscal 1997 included the HBO premier of
"Crossworlds." The increase in foreign distribution revenues was primarily due
to the timing of releases. In the three months ended March 31, 1998, there were
four (4) motion pictures "Eye of God," "The Colony," "Trucks" and "My Teacher's
Wife" initially released into the foreign market, whereas no motion pictures
were released in the same time period in fiscal 1997. The increase in revenues
from domestic theatrical distribution was primarily due to the release of "Star
Kid" in January 1998 compared to the release of "Meet
9
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
Wally Sparks" in the three months ended March 31, 1997. Interactive revenues
decreased due to the Company's decision to exit the interactive market as
described above.
Primarily as a result of continuing competition in the domestic home video
market, the Company is focusing its resources on producing and acquiring an
increased number of films with specialized theatrical potential and those that
are made for initial release on network and cable television. See "Liquidity
and Capital Resources."
GROSS PROFIT: Gross profit as a percentage of net revenues for the nine month
periods ended March 31, 1998 and 1997 were 14.4% and 16.5%, respectively, and
for the quarters ended March 31, 1998 and 1997 were 21.7% and 27.0%,
respectively.
The Company's gross profits for the nine months ended March 31, 1998 increased
$1.7 million or 22.9% compared with the same period in fiscal 1997. The
Company's gross profit for the three months ended March 31, 1998 increased $1.7
million or 44.9% compared with the same period in fiscal 1997. The increase in
gross profit for the quarter is primarily due to the recognition of the
increased estimated future revenue of the Company's product from domestic
distribution on DVD (digital video discs) and sell-thru home video. Estimated
total revenues and costs are reviewed on a quarterly basis and revisions to
amortization rates are made as necessary including write downs to net realizable
value. The increase for the nine month period is primarily due to the increase
in the quarter. The gross profit for the nine months ended March 31, 1998
included approximately $4.2 million in write downs to net realizable value of
film inventory. These write downs primarily related to a non-cash charge
associated with the lower than anticipated performance of the January 1998
theatrical release of "Star Kid" and a write down associated with management's
decision not to release "Chairman of the Board" with a wide theatrical release,
but rather to have a selected market theatrical release. The decision to limit
the "Chairman of the Board" theatrical release was made to mitigate the risks
associated with the higher print and advertising expenses required for wide
release pictures. The gross profit for the quarter ended March 31, 1997
included a $3.0 million charge associated with the
10
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
January 1997 theatrical release of "Meet Wally Sparks" partially offset by a
reduction of the inventory obsolescence reserve due to the salability of
inventory. The Company anticipates that the domestic home video market will
continue to be extremely competitive.
SELLING EXPENSES: Selling expenses as a percentage of net revenues for the nine
month periods ended March 31, 1998 and 1997 were 8.9% and 11.4%, respectively,
and for the quarters ended March 31, 1998 and 1997 were 8.1% and 13.4%,
respectively.
The Company's selling expenses for the nine months ended March 31, 1998
increased $493,000 or 9.8% compared with the same period in fiscal 1997. For
the three months ended March 31, 1998 selling expenses increased $181,000 or
9.9% compared with the same period in fiscal 1997. The increases reflect 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.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for
the nine months ended March 31, 1998 increased $375,000 or 11.4% compared with
the same period in fiscal 1997. For the three months ended March 31, 1998
general and administrative expenses increased $35,000 or 3.0% compared with the
same period in fiscal 1997. The increases were primarily due to the costs
associated with setting up three regional theatrical sales offices and increased
consulting charges.
BAD DEBT EXPENSE: Bad debt expense for the nine months ended March 31, 1998
increased $705,000 or 239.0% compared with the same period in fiscal 1997. Bad
debt expense for the three months ended March 31, 1998 increased $780,000 or
1083.3% compared with the same period in fiscal 1997. Bad debt expense
primarily represents reserves taken against domestic video and foreign sales.
The increases are primarily due to specific reserves taken as a result of the
currency crisis in Southeast Asia and an increase in past due video receivables.
11
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
INTEREST EXPENSE: Interest expense for the nine months ended March 31, 1998
increased $2.1 million or 190.3% compared with the same period in fiscal 1997.
Interest expense for the three months ended March 31, 1998 increased $611,000 or
110.1% compared with the same period in fiscal 1997. The increases in interest
expense were primarily due to higher levels of borrowing under the Company's
credit facility for purposes of funding the costs associated with the
acquisition and distribution of theatrical motion pictures. As of March 31,
1998, there was $61.8 million outstanding under the credit facility. The
Company expects to use excess cash flow generated by theatrical and library
product to decrease current debt levels. See "Liquidity and Capital Resources."
INTEREST AND INVESTMENT INCOME: Interest and investment income for the nine
months ended March 31, 1998 increased $53,000 or 85.5% compared with the same
period in fiscal 1997. Interest and investment income for the three months
ended March 31, 1998 increased $22,000 or 169.2% compared with the same period
in fiscal 1997. The increases were primarily due to interest income from loans
to officers in the fiscal 1998 period without any similar income in the fiscal
1997 period.
NET (LOSS) EARNINGS: The Company's net loss for the nine months ended March 31,
1998 increased $2.0 million or 83.1% compared with the same period in fiscal
1997. The loss for the nine months ended March 31, 1998 was $4.4 million
compared to a loss of $2.4 million in the comparable fiscal 1997 period. The
Company's net earnings for the three months ended March 31, 1998 increased
$69,000 or 82.1% compared with the same period in fiscal 1997. The fiscal 1998
nine month loss was primarily due to approximately $4.2 million in non-cash
write downs to net realizable value of film inventory. These write downs
primarily related to a charge associated with the lower than anticipated
performance of the January 1998 theatrical release of "Star Kid" and a write
down associated with management's decision not to release "Chairman of the
Board" with a wide theatrical release, but rather to have a selected market
theatrical release. The prior year losses were primarily due to a $3.0 million
write down associated with the January 1997 theatrical release of "Meet Wally
Sparks." The
12
<PAGE>
ITEM 2: (CONTINUED)
RESULTS OF OPERATIONS
increase in earnings for the three month period is primarily due to the increase
in gross profits partially offset by the increase in interest and bad debt
expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on cash generated by operations and borrowings under its
credit facility to finance its operations. The Company's cash flows from
operating, investing and financing activities for the nine months ended March
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------------
1998 1997
-------------- ---------------
(in thousands)
<S> <C> <C>
Net cash used by operating activities ($ 5,578) ($ 28,053)
Net cash used by investing activities (258) (187)
Net cash provided by financing activities 4,164 28,373
</TABLE>
Cash used by operations decreased by $22.5 million from $28.0 million used in
the nine months ended March 31, 1997 to $5.6 million used in the nine months
ended March 31, 1998 principally as the result of increased film amortization of
$9.9 million, a decrease in additions to film costs of $11.1 million, a decrease
in the change in other assets of $2.2 million and an increase in the change in
minimum guarantees and royalties payable of $3.9 million, which were partially
offset by an increased net loss of $2.0 million and a decrease in the change in
accounts payable and accrued expenses of $4.2 million. During the first nine
months of fiscal 1998 the Company continued to make significant investments in
film costs. The Company invested $42.1 million in additions to film inventory.
The additions were primarily incurred to release theatrically the films "Eve's
Bayou" and "Star Kid" and to produce and acquire new films.
Two principal factors have increased the length of time from investment in film
costs to recoupment, which has increased the Company's cash requirements. The
first factor is the terms of the Company's current credit facility entered into
in December 1996.
13
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Under the current 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 nine months to a year or more. Commitments to purchase
films from production companies upon delivery are included in contingent
contractual obligations. The second factor that has increased the length of time
from investment in film costs to recoupment is increased theatrical distribution
activity. Theatrical films generally require significant 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. For further information
see "Results of Operations."
Investing activities for the nine months ended March 31, 1998 and 1997 have
primarily consisted of expenditures on equipment and leasehold improvements
related to the expansion of theatrical operations.
Financing activities, consisting primarily of borrowings under the Company's
credit facility, were greater in the nine months ended March 31, 1997 than for
the nine months ended March 31, 1998, primarily as the result of motion picture
production, acquisition and distribution expenditures exceeding operating cash
inflows. The Company's cash requirements vary in part 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 the nine
months ended March 31, 1998 and 1997 the principal sources of funds have been
provided by the Company's credit facility and available cash.
14
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
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 March 31, 1998 there was $61.8
million outstanding under the credit facility. The Company expects to use
excess cash flow generated by theatrical and library product to decrease current
debt levels.
The credit agreement contains various financial and other covenants to which the
Company must adhere. These covenants, among other things, require the
maintenance of minimum net worth and various financial ratios which are reported
to the bank on a quarterly basis and include limitations on additional
indebtedness, liens, investments, disposition of assets, guarantees, affiliate
transactions and the use of proceeds. As previously reported, at December 31,
1997, the Company was out of compliance with certain financial covenants
primarily as a result of the non-cash write downs of "Star Kid" and "Chairman of
the Board" to net realizable value. In May 1998 the Company obtained a waiver
and amendment to its credit agreement. As of March 31, 1998 the Company is in
compliance with all covenants.
The Company believes that its present sources of working capital will be
sufficient to maintain its current level of operations in accordance with the
anticipated release schedule, as described below.
15
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Management of the Company is conducting a strategic review of the Company's
theatrical operations. This strategic review includes the possibility of an
increase in the theatrical exhibition of specialized films, with which the
Company has demonstrated past successes including "Eve's Bayou" and "Kama Sutra:
A Tale of Love," and a reduction in the distribution of wide mainstream features
with wide releases to greater than 1,000 screens and which require substantial
print and advertising commitments. The Company does not plan to release any
additional wide theatrical releases in fiscal 1998.
In the domestic specialized theatrical market the Company plans to release three
(3) motion pictures in fiscal 1998. In the nine months ended March 31, 1998 the
Company released two (2) specialized theatrical films "Box of Moonlight" and
"Eve's Bayou." During fiscal 1998 the Company plans to release approximately
thirty-five (35) motion pictures into the domestic home video rental market (of
which twenty-seven (27) were released in the first nine months of fiscal 1998)
and to continue to expand distribution in the sell-thru market. Also in fiscal
1998 the Company plans to release approximately twelve (12) to fourteen (14)
motion pictures initially into international distribution (of which seven (7)
were released in the first nine months of the fiscal year).
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.
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 1998,
the Company has made no expenditures under the repurchase program.
As a result of 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
16
<PAGE>
ITEM 2: (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
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" 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: 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 an increase in the theatrical
exhibition of specialized films and production and acquisition of made for
television product and a reduction in the distribution of wide mainstream
features is successful; new methods of distributing motion pictures; whether the
Company will be able to effect any strategic alternatives that may help enhance
shareholder value; and other factors referenced in this Form 10-Q and the Form
10-K filed for the year ended June 30, 1997.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No
- ---------- Description
--------------------------------------------------------
<C> <S>
10.80 Non-Qualified Stock Option Certificate dated January
14, 1998, by and between the Registrant and Gordon
Stulberg.
10.81 Non-Qualified Stock Option Certificate dated January
14, 1998, by and between the Registrant and Matthew H.
Saver.
10.82 Non-Qualified Stock Option Certificate dated January
14, 1998, by and between the Registrant and Tofigh
Shirazi.
10.83 Amendment no. 2 to the Credit, Security, Guaranty and
Pledge Agreement, dated March 31, 1998, 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.
10.84 Consulting Agreement, dated April 2, 1998, by and
between Trimark Pictures, Inc. and Burlage\Edell
Productions, Inc. f/s/o Roger Burlage.
10.85 Letter Agreement, dated April 2, 1998, by and between
Trimark Holdings, Inc. and Roger Burlage.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By: /s/ James E. Keegan
-------------------------------
James E. Keegan
Executive Vice President -
Finance and Chief Financial
Officer (Principal Financial
Officer and authorized to sign
on behalf of the Registrant)
Date: May 14, 1998
------------
19
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No Description Method of Filing
- ---------- ------------------------------------- ----------------
<C> <S> <C>
10.80 Non-Qualified Stock Option filed herewith
Certificate dated January 14, 1998, electronically
by and between the Registrant and
Gordon Stulberg.
10.81 Non-Qualified Stock Option filed herewith
Certificate dated January 14, 1998, electronically
by and between the Registrant and
Matthew H. Saver.
10.82 Non-Qualified Stock Option filed herewith
Certificate dated January 14, 1998, electronically
by and between the Registrant and
Tofigh Shirazi.
10.83 Amendment no. 2 to the Credit, filed herewith
Security, Guaranty and Pledge electronically
Agreement, dated March 31, 1998, 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.
10.84 Consulting Agreement, dated April 2, filed herewith
1998, by and between Trimark electronically
Pictures, Inc. and Burlage\Edell
Productions, Inc. f/s/o Roger
Burlage.
10.85 Letter Agreement, dated April 2, filed herewith
1998, by and between Trimark electronically
Holdings, Inc. and Roger Burlage.
27 Financial Data Schedule. filed herewith
electronically
</TABLE>
20
<PAGE>
Trimark Holdings, Inc.
2644 30th Street
Santa Monica, CA 90405
May 14, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We hereby transmit through the EDGAR system a Form 10-Q for Trimark Holdings,
Inc., a Delaware corporation.
Kindly contact the undersigned at (310) 314-2000 with any questions concerning
this filing.
Very truly yours,
/s/James E. Keegan
- ------------------
James E. Keegan
Executive Vice President Finance and
Chief Financial Officer
cc: Price Waterhouse (Attn: Richard Withey)
Chase Securities, Inc. (Attn: V. David Shaheen)
Rosenfeld, Meyer & Susman (Attn: William Ross)
<PAGE>
Exhibit 10.80
TRIMARK HOLDINGS, INC.
Non-qualified Stock Option Granted Under
The Trimark Holdings, Inc. Directors' Stock Option Plan
Certificate No. 11
Option granted on January 14, 1998 (the "Date of Grant") by Trimark Holdings,
Inc., a Delaware corporation (the "Company"), to Gordon Stulberg (the
"Optionee"):
Section 1. Grant of Option. The Company grants to the Optionee a non-
--------- ---------------
qualified option to purchase, on the terms and conditions hereinafter set forth,
2,000 shares (the "Shares") of the Company's Common Stock, par value $0.001 per
share (the "Stock"), at the option price of $5.50 per share. This Option is
granted pursuant to the Company's Directors' Stock Option Plan (the "Plan"), a
copy of which is attached hereto as Annex I. This Option is subject in its
entirety to the provisions of the Plan, all of which are incorporated by
reference herein.
Section 2. Period of Option. This Option will expire at the close of
--------- ----------------
business on January 14, 2008, ten years from the Date of Grant (the "Expiration
----------------
Date"), unless earlier terminated pursuant to Section 5 below.
Section 3. Right of Exercise. The Option granted to the Optionee shall
--------- -----------------
become exercisable in full on the Date of Grant. Once exercisable, the Option
may be exercised at any time prior to its expiration, cancellation or
termination as provided in the Plan. Partial exercise is permitted from time to
time provided that no partial exercise of the Option shall be for a number of
Shares having a purchase price of less than $1,000 or for a fractional number of
Shares.
Section 4. Exercise of Option.
--------- ------------------
(a) Method of Exercise. This Option shall be exercised by the delivery to the
------------------
Company of a written notice signed by the Optionee, which specifies the number
of Shares with respect to which the Option is being exercised and the date of
the proposed exercise. Such notice shall be delivered to the Company's office as
set forth in Section 8, no less than three business days in advance of the date
of the proposed exercise and shall be accompanied by this Option Certificate.
The Optionee
<PAGE>
may withdraw such notice at any time prior to the close of business on the
proposed date of exercise, in which case this Option Certificate shall be
returned to him or her.
Payment for Shares purchased upon exercise of the Option shall be made at the
time of exercise either in cash, by certified check or bank cashier's check or,
at the option of the Board of Directors of the Company, in Stock owned by the
Optionee and valued at its Fair Market Value (as defined in the Plan) on the
date of exercise, or partly in Stock with the balance in cash or by certified
check or bank cashier's check. Any payment in Stock shall be effected by its
delivery to the Secretary of the Company, endorsed in blank or accompanied by
stock powers executed in blank.
(b) Delivery of Stock Certificates Upon Exercise. Upon each exercise of this
--------------------------------------------
Option, the Company shall mail or deliver to the Optionee, as soon as
practicable, a stock certificate or certificates representing the Shares then
purchased. Notwithstanding the foregoing, no Option granted under the Plan may
be exercised unless and until the Shares to be issued upon the exercise thereof
have been registered under the Securities Act of 1933 and applicable state
securities laws, or are, in the opinion of counsel to the Company, exempt from
such registration. The Company shall not be under any obligation to register
under applicable federal or state securities laws any Shares to be issued upon
the exercise of an Option granted under the Plan, or to comply with an
appropriate exemption from registration under such laws in order to permit the
exercise of an Option and the issuance and sale of the Shares subject to such
Option. If the Company chooses to comply with such an exemption from
registration, the Shares issued under the Plan may bear an appropriate
restrictive legend restricting the transfer or pledge of the Shares represented
thereby, and the Company may also give appropriate stop-transfer instructions to
the transfer agent to the Company.
Further, the Company (or any subsidiary of the Company) may take such
provisions as it may deem appropriate for the withholding of any taxes or
payment of any taxes which it determines it may be required to withhold or pay
in connection with any Option or the payment of Stock pursuant to an Option.
The obligation of the Company to issue and deliver Shares pursuant to the Option
is conditioned upon the satisfaction of the provisions set forth in this
Section.
Section 5. Termination of Option. Except as herein otherwise stated, the
--------- ---------------------
Option, to the extent not theretofore
<PAGE>
exercised, shall terminate upon the first to occur of the following:
(a) the expiration of three months after the date on which the Optionee
ceases to be a director of the Company by reason of such Optionee's retirement;
(b) the expiration of one year after the date on which the Optionee ceases to
be a director of the Company by reason of the Optionee's death or disability; or
(c) the Expiration Date.
Notwithstanding anything in this Option Certificate to the contrary, in the
event that the Optionee ceases to be a director of the Company prior to the
exercise of the Option, otherwise than as described in (a) and (b) above, the
Option shall automatically terminate.
Section 6. Reclassification, Consolidation or Merger.
--------- -----------------------------------------
(a) If the capital stock of the Company shall be subdivided or combined,
whether by reclassification, stock dividend, stock split, reverse stock split or
other similar transaction, then the number of Shares and the exercise price per
Share will be adjusted proportionately.
(b) In the case of any capital reorganization or any reclassification of the
capital stock of the Company (except pursuant to a transaction described in
paragraph (a) above (a "Reorganization"), appropriate adjustment may be made by
the Company in the number and class of shares subject to or relating to Options
awarded under the Plan and outstanding at the time of such Reorganization.
Section 7. Rights Prior to Exercise of Option. The Option is non-
--------- ----------------------------------
transferable by the Optionee, except that in the event of the Optionee's death
the Option may be transferred by the Optionee's will or by the laws of descent
and distribution. During the Optionee's lifetime, the Option shall be
exercisable only by the Optionee. The Optionee shall have no rights as a
stockholder with respect to the Shares until exercise of the Option and delivery
to him or her of shares of Stock.
Section 8. Notices, Etc. Any notice hereunder by the Optionee shall be given
--------- -------------
to the Company in writing, and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at 2644 30th Street, Santa Monica, California 90405, or at such
other address as the Company may designate by notice to the Optionee.
Any notice or other communication to the Optionee hereunder shall be in
writing and any such communication and any
<PAGE>
delivery to the Optionee hereunder shall be deemed duly given or made if mailed
or delivered to the Optionee at such address as the Optionee may have on file
with the Company.
Section 9. Construction. The interpretation and construction of this Option
--------- ------------
is vested in the Company's Board of Directors, and such construction thereby
shall be final and conclusive.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to be
executed by its proper corporate officer thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By
--------------------------------
Name: James E. Keegan
Title: Executive Vice President
and Chief Financial
Officer
<PAGE>
Exhibit 10.81
TRIMARK HOLDINGS, INC.
Non-qualified Stock Option Granted Under
The Trimark Holdings, Inc. Directors' Stock Option Plan
Certificate No. 12
Option granted on January 14, 1998 (the "Date of Grant") by Trimark
Holdings, Inc., a Delaware corporation (the "Company"), to Matthew H. Saver (the
"Optionee"):
Section 1. Grant of Option. The Company grants to the Optionee a non-
--------- ---------------
qualified option to purchase, on the terms and conditions hereinafter set forth,
2,000 shares (the "Shares") of the Company's Common Stock, par value $0.001 per
share (the "Stock"), at the option price of $5.50 per share. This Option is
granted pursuant to the Company's Directors' Stock Option Plan (the "Plan"), a
copy of which is attached hereto as Annex I. This Option is subject in its
entirety to the provisions of the Plan, all of which are incorporated by
reference herein.
Section 2. Period of Option. This Option will expire at the close of
--------- ----------------
business on January 14, 2008, ten years from the Date of Grant (the "Expiration
----------------
Date"), unless earlier terminated pursuant to Section 5 below.
Section 3. Right of Exercise. The Option granted to the Optionee shall
--------- -----------------
become exercisable in full on the Date of Grant. Once exercisable, the Option
may be exercised at any time prior to its expiration, cancellation or
termination as provided in the Plan. Partial exercise is permitted from time to
time provided that no partial exercise of the Option shall be for a number of
Shares having a purchase price of less than $1,000 or for a fractional number of
Shares.
Section 4. Exercise of Option.
--------- ------------------
(a) Method of Exercise. This Option shall be exercised by the delivery to
------------------
the Company of a written notice signed by the Optionee, which specifies the
number of Shares with respect to which the Option is being exercised and the
date of the proposed exercise. Such notice shall be delivered to the Company's
office as set forth in Section 8, no less than three business days in advance of
the
<PAGE>
date of the proposed exercise and shall be accompanied by this Option
Certificate. The Optionee may withdraw such notice at any time prior to the
close of business on the proposed date of exercise, in which case this Option
Certificate shall be returned to him or her.
Payment for Shares purchased upon exercise of the Option shall be made at
the time of exercise either in cash, by certified check or bank cashier's check
or, at the option of the Board of Directors of the Company, in Stock owned by
the Optionee and valued at its Fair Market Value (as defined in the Plan) on the
date of exercise, or partly in Stock with the balance in cash or by certified
check or bank cashier's check. Any payment in Stock shall be effected by its
delivery to the Secretary of the Company, endorsed in blank or accompanied by
stock powers executed in blank.
(b) Delivery of Stock Certificates Upon Exercise. Upon each exercise of
--------------------------------------------
this Option, the Company shall mail or deliver to the Optionee, as soon as
practicable, a stock certificate or certificates representing the Shares then
purchased. Notwithstanding the foregoing, no Option granted under the Plan may
be exercised unless and until the Shares to be issued upon the exercise thereof
have been registered under the Securities Act of 1933 and applicable state
securities laws, or are, in the opinion of counsel to the Company, exempt from
such registration. The Company shall not be under any obligation to register
under applicable federal or state securities laws any Shares to be issued upon
the exercise of an Option granted under the Plan, or to comply with an
appropriate exemption from registration under such laws in order to permit the
exercise of an Option and the issuance and sale of the Shares subject to such
Option. If the Company chooses to comply with such an exemption from
registration, the Shares issued under the Plan may bear an appropriate
restrictive legend restricting the transfer or pledge of the Shares represented
thereby, and the Company may also give appropriate stop-transfer instructions to
the transfer agent to the Company.
Further, the Company (or any subsidiary of the Company) may take such
provisions as it may deem appropriate for the withholding of any taxes or
payment of any taxes which it determines it may be required to withhold or pay
in connection with any Option or the payment of Stock pursuant to an Option. The
obligation of the Company to issue and deliver Shares pursuant to the Option is
conditioned upon the satisfaction of the provisions set forth in this Section.
<PAGE>
Section 5. Termination of Option. Except as herein otherwise stated, the
--------- ---------------------
Option, to the extent not theretofore exercised, shall terminate upon the first
to occur of the following:
(a) the expiration of three months after the date on which the Optionee
ceases to be a director of the Company by reason of such Optionee's retirement;
(b) the expiration of one year after the date on which the Optionee ceases
to be a director of the Company by reason of the Optionee's death or disability;
or
(c) the Expiration Date.
Notwithstanding anything in this Option Certificate to the contrary, in the
event that the Optionee ceases to be a director of the Company prior to the
exercise of the Option, otherwise than as described in (a) and (b) above, the
Option shall automatically terminate.
Section 6. Reclassification, Consolidation or Merger.
--------- -----------------------------------------
(a) If the capital stock of the Company shall be subdivided or combined,
whether by reclassification, stock dividend, stock split, reverse stock split or
other similar transaction, then the number of Shares and the exercise price per
Share will be adjusted proportionately.
(b) In the case of any capital reorganization or any reclassification of
the capital stock of the Company (except pursuant to a transaction described in
paragraph (a) above (a "Reorganization"), appropriate adjustment may be made by
the Company in the number and class of shares subject to or relating to Options
awarded under the Plan and outstanding at the time of such Reorganization.
Section 7. Rights Prior to Exercise of Option. The Option is non-
--------- ----------------------------------
transferable by the Optionee, except that in the event of the Optionee's death
the Option may be transferred by the Optionee's will or by the laws of descent
and distribution. During the Optionee's lifetime, the Option shall be
exercisable only by the Optionee. The Optionee shall have no rights as a
stockholder with respect to the Shares until exercise of the Option and delivery
to him or her of shares of Stock.
Section 8. Notices, Etc. Any notice hereunder by the Optionee shall be
--------- -------------
given to the Company in writing, and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at 2644 30th Street, Santa Monica, California 90405, or at such
other address as the Company may designate by notice to the Optionee.
<PAGE>
Any notice or other communication to the Optionee hereunder shall be in
writing and any such communication and any delivery to the Optionee hereunder
shall be deemed duly given or made if mailed or delivered to the Optionee at
such address as the Optionee may have on file with the Company.
Section 9. Construction. The interpretation and construction of this
--------- ------------
Option is vested in the Company's Board of Directors, and such construction
thereby shall be final and conclusive.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to be
executed by its proper corporate officer thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By ________________________________
Name: James E. Keegan
Title: Executive Vice President
and Chief Financial Officer
<PAGE>
Exhibit 10.82
TRIMARK HOLDINGS, INC.
Non-qualified Stock Option Granted Under
The Trimark Holdings, Inc. Directors' Stock Option Plan
Certificate No. 13
Option granted on January 14, 1998 (the "Date of Grant") by Trimark
Holdings, Inc., a Delaware corporation (the "Company"), to Tofigh Shirazi (the
"Optionee"):
Section 1. Grant of Option. The Company grants to the Optionee a non-
--------- ---------------
qualified option to purchase, on the terms and conditions hereinafter set forth,
2,000 shares (the "Shares") of the Company's Common Stock, par value $0.001 per
share (the "Stock"), at the option price of $5.50 per share. This Option is
granted pursuant to the Company's Directors' Stock Option Plan (the "Plan"), a
copy of which is attached hereto as Annex I. This Option is subject in its
entirety to the provisions of the Plan, all of which are incorporated by
reference herein.
Section 2. Period of Option. This Option will expire at the close of
--------- ----------------
business on January 14, 2008, ten years from the Date of Grant (the "Expiration
----------------
Date"), unless earlier terminated pursuant to Section 5 below.
Section 3. Right of Exercise. The Option granted to the Optionee shall
--------- -----------------
become exercisable in full on the Date of Grant. Once exercisable, the Option
may be exercised at any time prior to its expiration, cancellation or
termination as provided in the Plan. Partial exercise is permitted from time to
time provided that no partial exercise of the Option shall be for a number of
Shares having a purchase price of less than $1,000 or for a fractional number of
Shares.
Section 4. Exercise of Option.
--------- ------------------
(a) Method of Exercise. This Option shall be exercised by the delivery to
------------------
the Company of a written notice signed by the Optionee, which specifies the
number of Shares with respect to which the Option is being exercised and the
date of the proposed exercise. Such notice shall be delivered to the Company's
office as set forth in Section 8, no less than three
<PAGE>
business days in advance of the date of the proposed exercise and shall be
accompanied by this Option Certificate. The Optionee may withdraw such notice at
any time prior to the close of business on the proposed date of exercise, in
which case this Option Certificate shall be returned to him or her.
Payment for Shares purchased upon exercise of the Option shall be made at
the time of exercise either in cash, by certified check or bank cashier's check
or, at the option of the Board of Directors of the Company, in Stock owned by
the Optionee and valued at its Fair Market Value (as defined in the Plan) on the
date of exercise, or partly in Stock with the balance in cash or by certified
check or bank cashier's check. Any payment in Stock shall be effected by its
delivery to the Secretary of the Company, endorsed in blank or accompanied by
stock powers executed in blank.
(b) Delivery of Stock Certificates Upon Exercise. Upon each exercise of
--------------------------------------------
this Option, the Company shall mail or deliver to the Optionee, as soon as
practicable, a stock certificate or certificates representing the Shares then
purchased. Notwithstanding the foregoing, no Option granted under the Plan may
be exercised unless and until the Shares to be issued upon the exercise thereof
have been registered under the Securities Act of 1933 and applicable state
securities laws, or are, in the opinion of counsel to the Company, exempt from
such registration. The Company shall not be under any obligation to register
under applicable federal or state securities laws any Shares to be issued upon
the exercise of an Option granted under the Plan, or to comply with an
appropriate exemption from registration under such laws in order to permit the
exercise of an Option and the issuance and sale of the Shares subject to such
Option. If the Company chooses to comply with such an exemption from
registration, the Shares issued under the Plan may bear an appropriate
restrictive legend restricting the transfer or pledge of the Shares represented
thereby, and the Company may also give appropriate stop-transfer instructions to
the transfer agent to the Company.
Further, the Company (or any subsidiary of the Company) may take such
provisions as it may deem appropriate for the withholding of any taxes or
payment of any taxes which it determines it may be required to withhold or pay
in connection with any Option or the payment of Stock pursuant to an Option. The
obligation of the Company to issue and deliver Shares
<PAGE>
pursuant to the Option is conditioned upon the satisfaction of the provisions
set forth in this Section.
Section 5. Termination of Option. Except as herein otherwise stated, the
--------- ---------------------
Option, to the extent not theretofore exercised, shall terminate upon the first
to occur of the following:
(a) the expiration of three months after the date on which the Optionee
ceases to be a director of the Company by reason of such Optionee's retirement;
(b) the expiration of one year after the date on which the Optionee ceases
to be a director of the Company by reason of the Optionee's death or disability;
or
(c) the Expiration Date. Notwithstanding anything in this Option
Certificate to the contrary, in the event that the Optionee ceases to be a
director of the Company prior to the exercise of the Option, otherwise than as
described in (a) and (b) above, the Option shall automatically terminate.
Section 6. Reclassification, Consolidation or Merger.
--------- -----------------------------------------
(a) If the capital stock of the Company shall be subdivided or combined,
whether by reclassification, stock dividend, stock split, reverse stock split or
other similar transaction, then the number of Shares and the exercise price per
Share will be adjusted proportionately.
(b) In the case of any capital reorganization or any reclassification of
the capital stock of the Company (except pursuant to a transaction described in
paragraph (a) above (a "Reorganization"), appropriate adjustment may be made by
the Company in the number and class of shares subject to or relating to Options
awarded under the Plan and outstanding at the time of such Reorganization.
Section 7. Rights Prior to Exercise of Option. The Option is non-
--------- ----------------------------------
transferable by the Optionee, except that in the event of the Optionee's death
the Option may be transferred by the Optionee's will or by the laws of descent
and distribution. During the Optionee's lifetime, the Option shall be
exercisable only by the Optionee. The Optionee shall have no rights as a
stockholder with respect to the Shares until exercise of the Option and delivery
to him or her of shares of Stock.
Section 8. Notices, Etc. Any notice hereunder by the Optionee shall be
--------- -------------
given to the Company in writing, and such notice and any payment by the Optionee
hereunder shall be deemed duly given or made only upon receipt thereof at the
Company's office at 2644 30th Street, Santa Monica, California 90405, or at
<PAGE>
such other address as the Company may designate by notice to the Optionee.
Any notice or other communication to the Optionee hereunder shall be in
writing and any such communication and any delivery to the Optionee hereunder
shall be deemed duly given or made if mailed or delivered to the Optionee at
such address as the Optionee may have on file with the Company.
Section 9. Construction. The interpretation and construction of this
--------- ------------
Option is vested in the Company's Board of Directors, and such construction
thereby shall be final and conclusive.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to be
executed by its proper corporate officer thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By ________________________________
Name: James E. Keegan
Title: Executive Vice President
and Chief Financial Officer
<PAGE>
Exhibit 10.83
AMENDMENT NO. 2 (the "Amendment") dated as of
March 31, 1998 to the CREDIT, SECURITY, GUARANTY AND
PLEDGE AGREEMENT, dated as of December 20, 1996 (as
amended by Amendment No.1 dated as of June 30, 1997 and
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 waive
existing events of default and amend Sections 6.14 and 6.18 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:
Section 1. Defined Terms. All capitalized terms not otherwise defined in
-------------
this Amendment are used herein as defined in the Credit Agreement.
Section 2. Waiver. Subject to the satisfaction of the conditions in Section
------
4 hereof, each of the Lenders waives the obligation of the Borrowers to comply
with (i) Section 6.14 of the Credit Agreement on December 31, 1997 and (ii)
Section 6.18
<PAGE>
of the Credit Agreement from December 31, 1997 through March 30, 1998.
Section 3. Amendment to the Credit Agreement. Subject to the satisfaction
---------------------------------
of the conditions in Section 4 hereof, the Credit Agreement is hereby amended
effective as of the date hereof, as follows:
(a) Section 2.1(f) is hereby inserted in the Credit Agreement as follows:
"(f) Notwithstanding anything to the contrary herein, the Borrowers shall
not request any Loan or Letter of Credit if, after giving effect thereto,
the sum of the Loans outstanding, plus the L/C Exposure, plus the then
existing Completion Reserves for all Designated Pictures would equal or
exceed $65,000,000, unless and until such time as the ratio set forth in
Section 6.18 (such ratio to be calculated for purposes hereof by including
the amount of such Loan or Letter of Credit and the then existing
Completion Reserve for all Designated Pictures) is equal to or less than
3.5.
(b) 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 $15,000,000 plus 100% of net new equity invested and
50% of net earnings, if any, for each fiscal year ending after June 30,
1997 and prior to the date as of which compliance is being determined."
(c) 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
<PAGE>
Sheet Receivables (but not more than the related portion of Product
Acquisition Commitments), to (ii) Consolidated Tangible Net Worth to be
greater than the ratio set forth below during the period corresponding
thereto:
<TABLE>
<CAPTION>
Ratio Period
- ----- ------
<C> <S>
4.75:1 March 31, 1998 to June 29,1998
4.5:1 June 30, 1998 to September 29, 1998
4.0:1 September 30, 1998 to December 30, 1998
3.75:1 December 31, 1998 to March 30, 1999
3.5:1 March 31, 1999 and thereafter
</TABLE>
(d) Schedule 2 of the Credit Agreement is hereby amended by amending the
Allowable Amount for Viacom/Paramount under the heading "Acceptable Major
Domestic Account Debtors (95%)" to read "6,000,000".
Section 4. Conditions to Effectiveness. The effectiveness of this
---------------------------
Amendment is subject to the satisfaction in full of the following conditions
precedent.
(a) The Administrative Agent shall have received executed counterparts of
this Amendment, which, when taken together, bear the signatures of
each party hereto;
(b) An amendment fee in the amount of 0.125% of the Commitment of each
Lender shall have been paid to the Administrative Agent on behalf of
each Lender.
(c) All legal matters in connection with this Amendment shall be
reasonably satisfactory to Morgan, Lewis & Bockius LLP, counsel for
the Administrative Agent.
Section 5. 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:
(a) Their respective obligations to the Lenders under the Credit Agreement
remain in full force and effect.
(b) 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
<PAGE>
warranties had been made on and as of the date hereof (except to the
extent such representations and warranties expressly relate to 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.
(d) The acknowledgments, representations and warranties in this Section 5
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.
Section 6. 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.
SECTION 7. 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.
Section 8. Counterparts. This Amendment may be executed in two or
------------
more counterparts, each of which shall constitute as an original, but all of
which when taken together shall constitute but one instrument.
<PAGE>
Section 9. 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.
Section 10. 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.
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:
<PAGE>
CITY NATIONAL BANK
By____________________________
Name:
Title:
COMERICA BANK-CALIFORNIA
By____________________________
Name:
Title:
FIRST HAWAIIAN BANK
By____________________________
Name:
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 10.84
Effective as of March 15, 1998
Mr. Roger Burlage
Burlage\Edell Productions, inc.
11601 Wilshire Boulevard
Suite 2030
Los Angeles, CA 90025
Re: CONSULTING AGREEMENT
Dear Roger:
This letter (the "Agreement") shall confirm the principal terms of the
agreement between Burlage\Edell Productions, Inc., ("Lender") f/s/o Roger
Burlage ("Burlage") as a consultant for Trimark Pictures, Inc. ("Trimark"). The
term "you", as used herein, shall mean Burlage and/or Lender.
1. CONSULTING FEE: Eight thousand three hundred thirty-four dollars
---------------
($8,334.00) per month, payable fifty percent (50%) on the fifteenth day of the
month beginning March 15, 1998 and fifty percent (50%) on the last day of the
month. Said fee shall be payable to Burlage\Edell Productions, Inc., 11601
Wilshire Boulevard, Suite 2030, Los Angeles, CA 90025.
2. TERM: At will. Either party shall have the right to terminate this
-----
Agreement by giving the other party thirty (30) days prior notice of such
party's intent to so terminate (the "Term"). The foregoing notwithstanding, but
subject to the provisions of paragraph 3 hereinbelow, neither party shall have
the right to terminate this Agreement prior to the first four (4) months of the
Term. Once this Agreement is terminated, neither party hereto shall have any
further obligation to the other party provided, however, the obligations
contained in paragraphs 4 and 5 shall survive the termination of this Agreement.
<PAGE>
Mr. Roger Burlage
CONSULTING AGREEMENT
as of March 15, 1998
Page 2
3. SERVICES AND RESPONSIBILITIES: The parties acknowledge that all services
------------------------------
rendered by you on behalf of Trimark shall be on a non-exclusive, first priority
basis and shall take precedence over any services you render for any third
parties. Notwithstanding the foregoing, you may render services on your own or
Lender's behalf which may take priority over the services you are to render to
Trimark hereunder.
Trimark acknowledges that you are involved with the following business
activities (collectively, the "Pre-existing Businesses"): (a) setting up a
motion picture production entity to fully finance motion picture distribution
via a major studio; (b) acting as an agent representing producers of independent
motion pictures (but specifically not representing any distribution entity other
than LIVE Entertainment); (c) acting as a sales agent for domestic rights of
motion picture product primarily geared for television distribution; (d)
independent theatrical motion picture production company (but specifically not a
distribution entity); (e) independent television production company; (f)
rendering consulting services for LIVE Entertainment; and (g) acting as an agent
with respect to the sale of a library of motion picture titles.
In the event that you enter into any other business significantly related
to the business activities of Trimark, you shall inform Trimark thereof in
writing. Also, you shall advise Trimark, in writing, before you take on any
other entertainment consultant arrangement for an entity similar to LIVE or
Trimark or if you join the board of directors of any other entertainment
company.
The foregoing notwithstanding and notwithstanding anything to the contrary
contained herein, in the event that you do render services which constitute a
conflict of interest (other than the Pre-existing Businesses) with Trimark's
affairs (as Trimark my ascertain in its sole reasonable discretion), Trimark
shall have the right to terminate this Agreement without any further obligation
to you whatsoever.
<PAGE>
Mr. Roger Burlage
CONSULTING AGREEMENT
as of March 15, 1998
Page 3
Burlage shall provide Trimark with advice and guidance as Trimark shall
reasonably require with respect to Trimark's businesses. Without limiting the
generality of the foregoing, Burlage shall specifically offer Trimark advice and
guidance, to the best of Burlage's ability, with respect to the following
matters: Trimark's theatrical distribution of its product; Trimark's DVD
business; Trimark's strategic planning; Trimark's acquisition of product and/or
libraries and Trimark's television business.
4. CONFIDENTIAL INFORMATION; RESULTS AND PROCEEDS: You hereby expressly agree
-----------------------------------------------
that while employed by Trimark you will not disclose, any confidential matters
of Trimark prior to, during or after your employment including the specifics of
this contract. The foregoing restriction shall not apply to such information as
is generally available to the general public.
5. NON-RAID: You hereby agree for a period of time commencing upon the date of
---------
this Agreement and continuing for two (2) years after the later of the
termination of this Agreement or your services as a member of the Board of
Directors of Trimark Holdings, Inc. (the "Non-Raid Term"), you shall not recruit
or hire any individual employed by Trimark during the Non-Raid Term. Trimark
shall not recruit or hire an individual employed by you During the Non-Raid
Term.
6. STOCK OPTIONS: Burlage shall have the option to purchase two thousand
--------------
(2,000) shares of Common Stock per year (granted in January) under terms
substantially similar to Trimark's Directors' Stock Option Plan.
7. INDEMNIFICATION: Trimark agrees that it will defend, indemnify and hold
----------------
Burlage harmless (including advancement of expenses) for any and all claims,
liability, losses, damages, costs, expenses (including reasonable attorneys'
fees), judgments and penalties arising out of, resulting from, or asserted
against Burlage in connection with the consulting services Burlage is required
to render to Trimark hereunder, unless arising as a result of your negligence or
willful misconduct.
<PAGE>
Mr. Roger Burlage
CONSULTING AGREEMENT
as of March 15, 1998
Page 4
8. EXPENSES: During the Term, Trimark will reimburse Burlage for all of
---------
Burlage's reasonable, pre-approved (by Trimark in writing ) third party expenses
paid by Burlage in connection with the services Burlage is required to render
thereunder.
9. HEALTH BENEFITS: Trimark shall provide Burlage with Trimark's standard
----------------
health insurance (as it may change from time to time) provided, however, that
Burlage shall be responsible for one hundred percent (100%) of the actual, third
party premiums associated with providing Burlage such coverage.
10. PRESS RELEASE: We shall mutually approve the press release, if any, issued
--------------
regarding your consulting services for Trimark.
11. OTHER PROVISIONS: 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. This Agreement
may be executed via facsimile and/or in counter-parts and all such counter-parts
and/or facsimile copies shall be deemed one and the same and an original of this
Agreement. This Agreement shall be governed by the laws of the State of
California as it pertains to agreements entered into and full performed within
the state of California.
If the foregoing meets with your approval, please countersign this
letter and return the fully executed letter to me.
My best regards.
Sincerely,
/s/ Mark Amin
Mark Amin
Chairman of the Board
<PAGE>
Mr. Roger Burlage
CONSULTING AGREEMENT
as of March 15, 1998
Page 5
AGREED TO AND ACCEPTED BY:
BURLAGE\EDELL PRODUCTIONS, INC.
/s/Roger A. Burlage Roger A. Burlage, President
- -------------------- ---------------------------
Signature Print Name/Title
I have read the foregoing Agreement and as a material inducement to Trimark
Pictures, Inc. to enter into this Agreement, I hereby agree to be bound by the
terms and considerations of the Agreement as if personally entered into by
myself.
/s/ Roger A. Burlage 4-2-98
- -------------------- ------
Roger Burlage Date
<PAGE>
Exhibit 10.85
TRIMARK HOLDINGS, INC.
as of March 27, 1998
Roger Burlage
20420 Celtic Street
Chatsworth, CA 91311
Re: BOARD OF DIRECTORS
Dear Roger:
This letter shall confirm that in consideration of Trimark Holdings, Inc.
("Trimark") allowing you to serve as a member of the Board of Directors of
Trimark, we have agreed that you shall not disclose any confidential matters of
Trimark or its subsidiary or affiliated entities, either prior to, during or
after the rendition of services as contemplated hereunder. The foregoing
restriction shall not apply to such information as is generally available to the
general public.
As a Director of Trimark, you shall be entitled to receive the standard
compensation that Trimark pays to its outside Directors. Currently this
consists of a yearly fee of ten thousand dollars ($10,000.00), payable monthly.
Your services as a Director of Trimark, (including, without limitation, the
duration thereof) shall be in accordance with Trimark's bylaws and standard
business practices.
If the foregoing meets with your approval, please countersign this letter
and return the fully executed letter to me.
My best regards.
Sincerely, AGREED TO AND ACCEPTED BY:
/s/ Mark Amin
Mark Amin /s/ Roger A. Burlage 4-2-98
--------------------- ------
Chairman of the Board Roger Burlage Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,993
<SECURITIES> 0
<RECEIVABLES> 30,771
<ALLOWANCES> 6,058
<INVENTORY> 898
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,115
<DEPRECIATION> 2,325
<TOTAL-ASSETS> 95,689
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 61,750
0
0
<COMMON> 5
<OTHER-SE> 15,943
<TOTAL-LIABILITY-AND-EQUITY> 95,689
<SALES> 62,163
<TOTAL-REVENUES> 62,163
<CGS> 53,200
<TOTAL-COSTS> 53,200
<OTHER-EXPENSES> 9,196
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> 3,257
<INCOME-PRETAX> (4,375)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,375)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
<FN>
<F1>IN ACCORDANCE WITH INDUSTRY PRACTICE, THE COMPANY PREPARES AN UNCLASSIFIED
BALANCE SHEET.
</FN>
</TABLE>
