<PAGE>
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, 1996
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 0-23958
CINERGI PICTURES ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4247952
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
2308 BROADWAY
SANTA MONICA, CALIFORNIA 90404
(Address of principal executive offices)
(Zip Code)
(310) 315-6000
(Registrant's telephone number, including area code)
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 April 10, 1996, there were 14,191,556 shares of Common Stock outstanding.
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
December 31, 1995 and March 31, 1996 ....................... 3
Condensed Consolidated Statements of Operations
for the three months ended
March 31, 1995 and March 31, 1996 .......................... 5
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1995 and
March 31, 1996 ............................................. 6
Notes to Condensed Consolidated
Financial Statements ....................................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .......................................... 14
Item 2. Changes in Securities ...................................... 14
Item 3. Defaults Upon Senior Securities ............................ 14
Item 4. Submission of Matters to a Vote of Security Holders ........ 14
Item 5. Other Information .......................................... 14
Item 6. Exhibits and Reports on Form 8-K ........................... 14
Signature ....................................................... 15
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 29,832,000 $ 22,493,000
Accounts receivable 7,494,000 6,877,000
Accounts receivable, related parties 682,000 730,000
Film costs, less accumulated amortization 160,756,000 166,796,000
Property and equipment, at cost,
less accumulated depreciation 4,381,000 5,698,000
Other assets 3,112,000 2,348,000
------------ ------------
TOTAL ASSETS $206,257,000 $204,942,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 1,785,000 $ 6,489,000
Accrued interest 2,613,000 3,319,000
Accrued residuals & participations 8,781,000 9,133,000
Deferred revenue 68,791,000 60,721,000
Capital lease obligation - 1,005,000
Loans payable 65,360,000 65,979,000
Notes and amounts payable
to related parties 5,310,000 5,004,000
------------ ------------
TOTAL LIABILITIES $152,640,000 $151,650,000
</TABLE>
3
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
------------ ------------
(unaudited)
<S> <C> <C>
Common Stock with certain redemption
features, $.01 par value, 1,117,000
shares issued and outstanding less
notes receivable from related parties
amounting to $1,350,000 $1,900,000 $2,212,000
Commitments & Contingencies (Note 4) -- --
Stockholders Equity
Preferred Stock, $.01 par value,
5,000,000 shares authorized, no shares
issued and outstanding -- --
Common Stock, $.01 par value,
20,000,000 shares authorized,
13,075,000 shares issued and outstanding 131,000 131,000
Additional Paid-in Capital 64,753,000 64,753,000
Retained Deficit (13,167,000) (13,804,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 51,717,000 51,080,000
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $206,257,000 $204,942,000
------------ ------------
------------ ------------
</TABLE>
NOTE: The balance sheet at December 31, 1995 has been derived from the audited
consolidated financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principals
for complete financial statements.
See notes to condensed consolidated financial statements.
4
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1996
------------ ------------
<S> <C> <C>
Revenues
Feature films $12,634,000 $37,105,000
Fee income 72,000 11,000
------------ ------------
12,706,000 37,116,000
Cost and expenses:
Amortization of film costs,
residuals & participations 11,801,000 36,335,000
General & administrative expense 569,000 1,476,000
------------ ------------
Operating income (loss) 336,000 (695,000)
Interest expense -- (176,000)
Interest income 39,000 234,000
------------ ------------
Net income (loss) before income taxes 375,000 (637,000)
Provision for income taxes (142,000) --
------------ ------------
Net income (loss) $ 233,000 $ (637,000)
------------ ------------
------------ ------------
Net income (loss) per share $ 0.02 $ (0.04)
------------ ------------
------------ ------------
Weighted average number of
shares outstanding 11,192,000 14,192,000
------------ ------------
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) $ 233,000 $ (637,000)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 100,000 294,000
Amortization of unearned compensation (287,000) 312,000
Film costs amortization 11,000,000 33,686,000
Changes in operating assets and liabilities:
Accounts receivable 2,634,000 617,000
Accounts receivable, related parties 234,000 (48,000)
Film costs additions (23,699,000) (39,726,000)
Other assets 188,000 764,000
Accounts payable & accrued interest 530,000 5,410,000
Accrued residuals and participations payable 802,000 352,000
Income taxes payable 142,000 --
Deferred revenue 694,000 (8,070,000)
------------ ------------
Net cash used in operating activities (7,429,000) (7,046,000)
INVESTING ACTIVITIES
Purchase of property and equipment (34,000) (31,000)
------------ ------------
Net cash used in investing activities (34,000) (31,000)
</TABLE>
6
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1996
------------ ------------
<S> <C> <C>
FINANCING ACTIVITIES
Increase in loans payable $12,669,000 $19,815,000
Payments on loans payable (4,856,000) (19,196,000)
Increase in notes and amounts payable to
related parties 279,000 238,000
Payments on notes and amounts payable to
related parties (391,000) (544,000)
Payments on capital lease obligation -- (575,000)
------------ ------------
Net cash provided (used) by financing activities 7,701,000 (262,000)
------------ ------------
Increase (decrease) in cash 238,000 (7,339,000)
Cash and cash equivalents at beginning of year 2,665,000 29,832,000
------------ ------------
Cash and cash equivalents at end of period $ 2,903,000 $ 22,493,000
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 9,000 $ 23,000
</TABLE>
THREE MONTHS ENDING MARCH 31, 1996
Visual effects equipment amounting to $1,580,000 was purchased under a
capital lease agreement.
See notes to condensed consolidated financial statements.
7
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
NOTE 1 -- PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Cinergi Pictures Entertainment Inc. (the "Company" or "CPEI") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in CPEI's Annual Report on
Form 10-K ("Annual Report") filed with the Securities and Exchange Commission.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
NET INCOME (LOSS) PER COMMON SHARE
The per share data for the three month periods ended March 31, 1995 and
1996 are based on the weighted average number of common and common share
equivalents outstanding during the period. Common Stock with certain redemption
features are considered common share equivalents. Stock options and warrants
are considered common share equivalents if dilutive.
RECLASSIFICATION
Certain reclassifications were made to the 1995 balances to conform to the
March 31, 1996 presentation primarily to not reflect Buena Vista Pictures
Distribution, Inc. as a related party.
8
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
March 31, 1996
NOTE 3 -- FILM COSTS
Film costs consist of the following:
DECEMBER 31 MARCH 31
1995 1996
------------ ------------
Released, less amortization . . . . . $101,238,000 $ 70,645,000
In production . . . . . . . . . . . . 53,545,000 89,009,000
Development . . . . . . . . . . . . . 5,973,000 7,142,000
------------ ------------
$160,756,000 $166,796,000
------------ ------------
------------ ------------
NOTE 4 -- CONTINGENCIES
In December 1995, the U.S. Attorney for the Central District of California
served subpoenas ("Subpoenas") on the Company related to a grand jury
investigation of federal tax aspects of various transactions involving Andrew G.
Vajna, President, Chief Executive Officer and Chairman of the Board of Directors
of the Company, and certain other persons and entities (the "Investigation").
The Company believes the Investigation is focusing primarily on (i) the 1988 and
1989 personal tax returns of Mr. Vajna and the tax returns of certain other
persons and entities, and (ii) the ongoing audits of Mr. Vajna's tax returns
since 1990 by the Internal Revenue Service. The Company has not been identified
by the U.S. Attorney as being a target of the Investigation; however, there can
be no assurance that the Company's status will not change in the future. The
Board of Directors of the Company has formed a committee of the three outside
directors of the Company (the "Special Committee") to monitor the Company's
response to the Subpoenas, to consider the Company's indemnification obligations
with respect to its employees, officers and directors and to otherwise evaluate
and act upon matters related to the Investigation. The Company has engaged
counsel to represent it in connection with the Investigation and is in the
process of responding to the Subpoenas. Given the uncertainty of the
Investigation, there is currently no basis upon which to estimate the impact, if
any, the Investigation may have on the Company.
Pursuant to Article Tenth of the Company's Restated Certificate of
Incorporation, Article V of the Company's Bylaws, indemnity agreements entered
into between the Company and certain of its officers and directors, and the
provisions of Section 145 of the Delaware General Corporation Law, the Company
is advancing the expenses of certain of its employees, officers and directors
other than Mr. Vajna (the "Indemnitees") which they may incur in connection with
the Investigation. The Indemnitees have undertaken to reimburse the Company for
their expenses if it is ultimately determined by the Special Committee that they
are not entitled to be indemnified. In addition, Mr. Vajna has undertaken to
reimburse the Company under certain circumstances with respect to the expenses
of the Indemnitees. Given the current uncertainty regarding the scope and
duration of the Investigation and the amount of expenses which may be
9
<PAGE>
incurred by the Indemnitees in connection with the Investigation, there is no
basis upon which to estimate the financial impact which the foregoing may have
on the Company.
In connection with the Investigation, the Company has determined to advance
the expenses of the Indemnitees which the Indemnitees may incur in connection
with the Investigation. As of May 10, 1996, the Company had advanced an
aggregate of $71,000 on behalf of the Indemnitees.
On May 13, 1996, a purported class action lawsuit was filed in the Superior
Court of California for the County of Los Angeles by Aron Golds, an alleged
stockholder of the Company, against the Company and certain of its executive
officers and directors (Andrew G. Vajna, Warren Braverman, Dianne Caplan
Lebovits, Fred R. Feitshans and Randolph Paul). The complaint alleges, among
other things, that the defendants (i) negligently misrepresented (or omitted)
material facts about the business, financial condition, future growth and
profitability of the Company in documents and releases of the Company, including
the prospectus for the Company's 1995 Common Stock offering, and in alleged
statements by certain of the individual defendants, and (ii) violated federal
and state securities laws by virtue of their conduct. On the same date, a
second purported class action lawsuit was filed in the same court by Michael
Shores, also an alleged stockholder of the Company, against the same defendants
as in the first lawsuit alleging violations of Sections 11 and 15 of the
Securities Act of 1933, as amended, and otherwise making substantially the same
allegations as in the first lawsuit. Both lawsuits seek, among other things, an
award of unspecified money damages in favor of the plaintiffs and the other
members of the purported class for all losses and injuries allegedly suffered as
a result of the defendants' alleged conduct.
Management of the Company is in the process of reviewing the complaints and
is unable, at this time, to predict the ultimate outcome of the purported class
actions. Based upon a preliminary review of the complaints, however, the
Company does not believe that these lawsuits have merit and intends to defend
them vigorously. Accordingly, no provision for any liability which may result
has been made in the unaudited financial statements contained in this Form 10Q.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995
Feature film revenues increased from $12,634,000 for the quarter ended
March 31, 1995 to $37,105,000 for the quarter ended March 31, 1996. Feature
film revenues for the quarter ended March 31, 1995 included additional revenues
of $2,382,000 from the domestic home video and pay television distribution of
TOMBSTONE and revenues of $10,217,000 from the domestic home video availability
of COLOR OF NIGHT. Feature film revenues for the quarter ended March 31, 1996
principally included revenues of $31,503,000 from the international theatrical
availability of NIXON and $2,949,000 from domestic pay-per-view and foreign
overages from DIE HARD WITH A VENGEANCE.
Amortization of film costs, residuals and participations increased from
$11,801,000 for the quarter ended March 31, 1995 to $36,335,000 for the quarter
ended March 31, 1996 due to the increase in feature film revenues recognized in
the quarter ended March 31, 1996 as compared to the quarter ended March 31,
1995. The Company estimates the total projected revenues to be received from
the exploitation of a motion picture in all territories and media. As the
revenues from a motion picture are recognized, the percentage of revenues
recognized to total estimated revenues is applied to film costs for such motion
picture to record amortization.
Selling, general and administrative ("SG&A") expenses (excluding production
overhead costs capitalized to film costs) increased from $569,000 for the
quarter ended March 31, 1995 to $1,476,000 for the quarter ended March 31, 1996.
This difference is principally due to the overhead attributable to the Company's
visual effects facility which was acquired in late 1994, not being capitalized
into film costs in the first quarter of 1996. Production overhead being
capitalized to films increased from $1,538,000 in the first quarter of 1995 as
compared to $1,664,000 in the first quarter of 1996. The Company capitalizes
production overhead incurred in connection with the production of a motion
picture by adding such costs to the capitalized film costs of such motion
picture. The total of SG&A expenses and production overhead costs capitalized
to film costs increased from $2,107,000 for the quarter ended March 31, 1995 to
$3,140,000 for the quarter ended March 31, 1996.
Interest expense increased from $0 for the quarter ended March 31, 1995 to
$176,000 for the quarter ended March 31, 1996. This increase was primarily due
to a lesser percentage of total interest expense being capitalized to film costs
due to the Company having fewer films in production in 1996. Interest expense
of $2,976,000 was capitalized into film costs for the quarter ended March 31,
1995 compared to $1,376,000 for the quarter ended March 31, 1996. The Company
determines the amount of interest expense to be capitalized to each motion
picture in production by multiplying the average cumulative film cost of all
motion pictures in production in a given period by the overall effective
interest rate paid by the Company on the
11
<PAGE>
aggregate amount of debt outstanding for such period. Interest expense,
including interest capitalized into film costs, decreased from $2,976,000 for
the quarter ended March 31, 1995 to $1,552,000 for the quarter ended March 31,
1996. This decrease was due to the smaller average outstanding balances of the
Company's production loans in the quarter ended March 31, 1996 as compared to
the quarter ended March 31, 1995. Three films were in various stages of
production during the first quarter of 1996 as compared to six films during the
first quarter of 1995.
Fee income decreased from $72,000 for the quarter ended March 31, 1995 to
$11,000 for the quarter ended March 31, 1996. Fee income represented fees
earned in connection with an arrangement to collect accounts receivable on
behalf of, and to distribute motion pictures produced by, an unrelated third
party.
Interest income increased from $39,000 for the quarter ended March 31, 1995
to $234,000 for the quarter ended March 31, 1996 due to substantially higher
cash balances during the first quarter of 1996.
As a result of the above, the Company had a net loss for the quarter ended
March 31, 1996 of $637,000 as compared to net income of $233,000 for the quarter
ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a Credit, Security, Pledge and Guaranty Agreement dated as
of August 16, 1994 with Chase Manhattan Bank ("Chase") which is the successor to
Chemical Bank, and a syndicate of lenders (collectively, the "Lenders") which
provides the Company with a revolving credit facility of $150,000,000 (the
"Credit Facility"). Under the Credit Facility, the Lenders have committed to
make loans available until August 31, 1997, although the Lenders will continue
to make loans to finance any motion picture in which principal photography has
commenced or that has otherwise satisfied certain conditions prior to such date.
The Credit Facility is secured by substantially all of the assets of the
Company, including $5,000,000 in proceeds from the "key man" life insurance on
Mr. Vajna. The Credit Facility matures on February 28, 1999. As of March 31,
1996, approximately $38,161,000 in borrowings were outstanding under the Credit
Facility. As of March 31, 1996, the interest rate on the amounts outstanding
under the Credit Facility was approximately 7.15% per annum. The commitment fee
on the average daily unused portion of the commitment is 3/8 of one percent per
annum.
The Company previously entered into term loan agreements with Buena Vista
Pictures Distribution, Inc. ("BVPD") to finance a portion of the costs of COLOR
OF NIGHT, THE SCARLET LETTER, NIXON, THE SHADOW CONSPIRACY and EVITA. Each loan
must be repaid with accrued interest on or before the earlier of (i) four years
after the loan proceeds are first made available to the Company or (ii) three
years after the initial domestic theatrical release of the applicable picture.
Each of these loans are secured by rights to distribute the respective motion
picture in the Americas and, except for one term loan personally guaranteed by
Mr. Vajna, certain other
12
<PAGE>
distribution rights related to other motion pictures financed by BVPD. At March
31, 1996, the aggregate principal loan balances were $28,045,000.
The Company currently is in production of Evita and post-production of THE
SHADOW CONSPIRACY and AMANDA. Through March 31, 1996, the Company had incurred
approximately $80,591,000 in direct negative costs in connection with the motion
pictures THE SHADOW CONSPIRACY, AMANDA and EVITA. The Company currently
expects, subject to changes in existing budgets, to incur an additional
approximately $26,875,000 in direct negative costs in connection with such
motion pictures.
The Company has entered into a one year capital lease for certain visual
effects equipment. The total capital lease obligation at March 31, 1996 was
$1,005,000.
The Company believes that its existing capital, funds from operations,
borrowings under the Credit Facility, advances and production loans from BVPD
and other available sources of capital, will be sufficient to enable the Company
to fund its planned development, production and overhead expenditures for the
next 12 months.
13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to Part I -- FINANCIAL INFORMATION, Item 1. --
Financial Statements (unaudited), Note 4 to Condensed Financial
Statements which is incorporated herein by this reference.
On May 13, 1996, a purported class action lawsuit was filed in the
Superior Court of California for the County of Los Angeles by Aron
Golds, an alleged stockholder of the Company, against the Company and
certain of its executive officers and directors (Andrew G. Vajna,
Warren Braverman, Dianne Caplan Lebovits, Fred R. Feitshans and
Randolph Paul). The complaint alleges, among other things, that the
defendants (i) negligently misrepresented (or omitted) material facts
about the business, financial condition, future growth and
profitability of the Company in documents and releases of the Company,
including the prospectus for the Company's 1995 Common Stock offering,
and in alleged statements by certain of the individual defendants, and
(ii) violated federal and state securities laws by virtue of their
conduct. On the same date, a second purported class action lawsuit was
filed in the same court by Michael Shores, also an alleged stockholder
of the Company, against the same defendants as in the first lawsuit
alleging violations of Sections 11 and 15 of the Securities Act of
1933, as amended, and otherwise making substantially the same
allegations as in the first lawsuit. Both lawsuits seek, among other
things, an award of unspecified money damages in favor of the
plaintiffs and the other members of the purported class for all
losses and injuries allegedly suffered as a result of the defendants'
alleged conduct.
Management of the Company is in the process of reviewing the
complaints and is unable, at this time, to predict the ultimate outcome
of the purported class actions. Based upon a preliminary review of
the complaints, however, the Company does not believe that these
lawsuits have merit and intends to defend them vigorously. Accordingly,
no provision for any liability which may result has been made in the
unaudited financial statements contained in this Form 10Q.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits.
Exhibit No. Description
----------- -----------
10.54 Undertaking to Reimburse Indemnification Costs dated
March 5, 1996
27 Article 5 Financial Data Schedule
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three-month period
ended March 31, 1996.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CINERGI PICTURES ENTERTAINMENT INC.
May 14, 1996 By: //s// Warren Braverman
----------------------------------------
Warren Braverman, Executive Vice President,
Chief Financial Officer and Treasurer,
signing both in his capacity as Executive
Vice President on behalf of Registrant and as
Chief Financial Officer of Registrant
15
<PAGE>
UNDERTAKING TO REIMBURSE INDEMNIFICATION COSTS
To the Board of Directors of
Cinergi Pictures Entertainment Inc.
Cinergi Pictures Entertainment Inc. (the "Corporation"), of which I am
Chairman of the Board of Directors, President and Chief Executive Officer, has
been served with subpoenas in connection with a grand jury investigation (the
"Investigation") of certain federal tax aspects of various transactions
involving me and other persons and entities, as well as audits of my personal
tax returns and those of certain other persons and entities.
In connection with the Investigation, certain of the Corporation's
officers, directors and employees (each an "Indemnitee" and collectively, the
"Indemnitees") may incur certain costs and expenses, including attorney' fees
("Costs"), in connection with the Investigation. Each of the Indemnitees has
requested that the Corporation advance Costs as provided in the Corporation's
Bylaws and that the Corporation indemnify each Indemnitee with respect to such
Costs.
I agree to reimburse the Corporation for all or some of the Costs advanced
and indemnification obligations incurred with respect to the Indemnitees if the
Special Committee of the Corporation's Board of Directors, formed in connection
with the Investigation and consisting of three outside directors of the Company,
determines at any time by a majority vote of said Special Committee members that
such reimbursement is appropriate under applicable legal requirements, based on
a determination by such Special Committee of an equitable division of such Costs
and indemnification obligations.
Dated: March 5, 1996
//s// Andrew G. Vajna
---------------------------------
Exhibit 10.54
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 THROUGH 5 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 22,493
<SECURITIES> 0
<RECEIVABLES> 7,607
<ALLOWANCES> 0
<INVENTORY> 166,796
<CURRENT-ASSETS> 189,754
<PP&E> 7,625
<DEPRECIATION> 1,927
<TOTAL-ASSETS> 204,942
<CURRENT-LIABILITIES> 83,911
<BONDS> 0
0
0
<COMMON> 131
<OTHER-SE> 50,949
<TOTAL-LIABILITY-AND-EQUITY> 204,942
<SALES> 37,116
<TOTAL-REVENUES> 37,350
<CGS> 36,335
<TOTAL-COSTS> 37,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176
<INCOME-PRETAX> (637)
<INCOME-TAX> 0
<INCOME-CONTINUING> (637)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (637)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
