<PAGE>
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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 SEPTEMBER 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 0-23958
--------------------------
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 organization) Identification No.)
2308 BROADWAY
SANTA MONICA, CALIFORNIA 90404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 315-6000
--------------------------
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. /X/ Yes / / No
As of November 14, 1997, there were 13,446,874 shares of the Registrant's
Common Stock outstanding.
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<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets --
December 31, 1996 and September 30, 1997 (unaudited). . . . . . .3
Condensed Consolidated Statements of Operations (unaudited)
for the three and nine months ended September 30,
1996 and September 30, 1997 . . . . . . . . . . . . . . . . . . .5
Condensed Consolidated Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1996 and
September 30, 1997. . . . . . . . . . . . . . . . . . . . . . . .6
Notes to Condensed Consolidated
Financial Statements (unaudited). . . . . . . . . . . . . . . . .8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 16
Item 3. Quantitative and Qualitative Disclosures
about Market Risk . . . . . . . . . . . . . . . . . . . . . . . 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . 24
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . 24
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 24
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 26
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2
<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1996 1997
------------ ------------
(unaudited)
ASSETS
Cash and cash equivalents $ 27,364,000 $ 26,073,000
Restricted cash 5,654,000 5,169,000
Accounts receivable 10,850,000 7,367,000
Accounts receivable, related parties 799,000 849,000
Film costs, less accumulated amortization 103,792,000 53,424,000
Property and equipment, at cost,
less accumulated depreciation 4,819,000 427,000
Other assets 3,270,000 2,849,000
------------ ------------
TOTAL ASSETS $156,548,000 $ 96,158,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $2,141,000 $ 3,156,000
Accrued interest 23,000 0
Accrued residuals & participations 13,045,000 13,837,000
Deferred revenue 46,568,000 2,141,000
Capital lease obligation 291,000 --
Loans payable 6,026,000 7,753,000
Notes and amounts payable
to related parties 49,747,000 53,350,000
------------ ------------
TOTAL LIABILITIES $117,841,000 $ 80,237,000
3
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, September 30,
1996 1997
----------- ------------
(unaudited)
Common Stock with certain redemption
features, $.01 par value, 744,682 (1996)
and 0 (1997) shares issued and outstanding
less notes receivable from related parties
amounting to $900,000 (1996) and $0 (1997) $2,100,000 $ --
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,
13,074,533 (1996) and 13,446,874
(1997) shares issued and outstanding 131,000 135,000
Additional Paid-in Capital 65,548,000 68,095,000
Retained Deficit (29,072,000) (51,859,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 36,607,000 16,371,000
Receivable from shareholder
-- (450,000)
------------ ------------
$36,607,000 $15,921,000
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $156,548,000 $96,158,000
------------ ------------
------------ ------------
NOTE: The balance sheet at December 31, 1996 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 Nine Months Ended
September 30, September 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Feature films $30,160,000 $15,649,000 $89,712,000 $59,186,000
Fee income 29,000 0 60,000 23,000
----------- ------------ ------------ ------------
30,189,000 15,649,000 89,772,000 59,209,000
Cost and expenses:
Amortization of film
costs, residuals &
participations 28,543,000 17,785,000 86,954,000 62,198,000
Selling, general &
administrative expenses 2,111,000 6,210,000 4,990,000 14,071,000
Provision for impairment
of long lived assets -- -- -- 2,665,000
----------- ------------ ------------ ------------
Operating loss (465,000) (8,346,000) (2,172,000) (19,725,000)
Interest expense -- (1,970,000) (176,000) (4,362,000)
Interest income 171,000 483,000 701,000 1,300,000
----------- ------------ ------------ ------------
Net loss $ (294,000) $ (9,833,000) $ (1,647,000) $(22,787,000)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Net loss per share $(0.02) $ (0.73) $(0.12) $(1.69)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Weighted average number
of shares outstanding 14,192,000 13,447,000 14,192,000 13,448,000
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Nine Months Ended
September 30,
1996 1997
------------- -------------
OPERATING ACTIVITIES
Net loss $( 1,647,000) $(22,787,000)
Adjustments to reconcile net loss to net
cash provided by (used in)
operating activities:
Depreciation 901,000 1,821,000
Provision for impairment of
long-lived assets -- 2,665,000
Amortization of unearned compensation 938,000 --
Film cost amortization 81,317,000 54,502,000
Changes in operating assets and liabilities:
Accounts receivable (3,786,000) 3,483,000
Accounts receivable, related parties (357,000) (50,000)
Film cost additions (65,245,000) (4,134,000)
Other assets (58,000) 421,000
Accounts payable & accrued expenses and
interest 1,198,000 992,000
Accrued residuals and
participations payable 1,212,000 792,000
Deferred revenue (21,753,000) (44,426,000)
------------- -------------
Net cash used in
operating activities ( 7,280,000) (6,721,000)
INVESTING ACTIVITIES
Purchase of property and equipment (112,000) (110,000)
Proceeds from the sale of property and equipment -- 16,000
------------- -------------
Net cash used in investing activities (112,000) (94,000)
See notes to condensed consolidated financial statements.
6
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(UNAUDITED)
Nine Months Ended
September 30,
1996 1997
------------- -------------
FINANCING ACTIVITIES
Increase in loans payable $32,196,000 $ 20,124,000
Payments on loans payable (42,396,000) (18,397,000)
Decrease in restricted cash -- 485,000
Increase in notes and amounts payable to
related parties 615,000 4,089,000
Payments on notes and amounts payable to
related parties (718,000) (486,000)
Payments on capital lease obligation (1,105,000) (291,000)
------------- -------------
Net cash (used in) provided by financing
activities (11,408,000) 5,524,000
------------- -------------
(Decrease) increase in cash (18,800,000) (1,291,000)
Cash and cash equivalents at beginning of year 29,832,000 27,364,000
------------- -------------
Cash and cash equivalents at end of period $11,032,000 $ 26,073,000
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $23,000 $ 18,400
NINE MONTHS ENDED SEPTEMBER 30, 1997
In January 1997, the Company repurchased 372,341 shares of Common Stock of the
Company in exchange for the forgiveness of a note amounting to $450,000.
NINE MONTHS ENDED SEPTEMBER 30, 1996
Visual effects equipment amounting to $1,580,000 was purchased under a capital
lease agreement.
Accrued interest of $575,000 relating to production loans owed to a third
party was offset against monies owed to the Company by such third party.
See notes to condensed consolidated financial statements.
7
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1997
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 nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in CPEI's Annual Report on
Form 10-K for the year ended December 31, 1996 ("Annual Report") filed with the
Securities and Exchange Commission.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
NET LOSS PER COMMON SHARE. The per share data for the three and nine month
periods ended September 30, 1996 and 1997 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.
RECENT DEVELOPMENTS. In February 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, Earnings Per Share, which is effective for
annual and interim financial statements issued for periods ending after December
15, 1997 and early adoption is not permitted. When adopted, the statement will
require restatement of prior years' earnings per share ("EPS"). SFAS No. 128
was issued to simplify the standards for calculating EPS previously found in APB
No. 15, Earnings Per Share. SFAS No. 128 replaces the presentation of primary
EPS with a presentation of basic EPS. The new rules also require dual
presentation of basic and diluted EPS on the face of the statement of operations
for companies with a complex capital structure. For the Company, basic EPS will
exclude the dilutive effects of stock options and warrants. Diluted EPS for the
Company will reflect all potential dilutive securities. Under the provisions of
SFAS No. 128, basic and diluted EPS would have been the same as the reported
amounts.
In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income.
The statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The statement applies to all enterprises that provide a
full set of general-purpose financial statements. The statement becomes
effective for all financial statements for fiscal years beginning after December
15, 1997, with earlier application permitted. Further, in June 1997, FASB
issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. The statement changes the way public companies report segment
information in annual financial statements and also requires those companies to
report selected segment information in inteirm financial reports to
shareholders. The proposal supersedes FASB Statement No. 14 on segments and
does not apply to nonpublic enterprises or to not-for-profit organizations. The
statement becomes effective for all financial statements for fiscal years
beginning after December 15, 1997, with earlier adoption permitted. The Company
does not believe the adoption of SFAS No. 130 and SFAS No. 131 will have a
material effect on the Company's financial statements.
NOTE 3 -- FILM COSTS
Film costs consist of the following:
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ ------------
Released, less amortization . . . . . $52,077,000 $36,827,000
Completed, not released . . . . . . . 37,025,000 11,529,000
In production . . . . . . . . . . . . 9,373,000 --
Development . . . . . . . . . . . . . 5,317,000 5,068,000
------------ ------------
$103,792,000 $53,424,000
------------ ------------
------------ ------------
8
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
In December 1995, the U.S. Attorney for the Central District of California
served subpoenas ("Subpoenas") on the Company relating 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
Company 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 ("Indemnitees") which they may incur in connection with the
Investigation. As of November 10, 1997, the Company had advanced an aggregate of
$294,000 on behalf of the Indemnitees. The Indemnitees have undertaken to
reimburse the Company for their expenses if it is ultimately determined 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
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.
On August 25, 1997, the Company settled legal proceedings brought by
Laurence Fishburne and The LOA Productions, Inc., Mr. Fishburne's loan-out
corporation ("LOA"), against the Company, a subsidiary of the Company and
Randolph M. Paul, former Senior Vice President, Business Affairs and a former
Director of the Company (the "Fishburne Litigation"). The action, for breach of
oral contract, fraud and deceit, and civil conspiracy, was originally filed on
July 11, 1994. The plaintiffs had claimed that the Company entered into an oral
contract for Mr. Fishburne to appear in the motion picture, DIE HARD WITH A
VENGEANCE, but repudiated the contract the following day. Plaintiffs claimed
damages for $1,750,000, representing the fixed compensation to which they allege
they were entitled, additional compensatory damages of up to $350,000 and
general and punitive damages.
Pursuant to the terms of the settlement, the Company paid LOA $750,000 and
entered into certain agreements with plaintiffs and an entity controlled by Mr.
Fishburne which provide the Company with
9
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
a non-exclusive option (the "Option") to acquire certain rights ("Rights") to a
play and related screenplay both written by Mr. Fishburne. The Company also
established a letter of credit in the amount of $600,000, the amount
which must be paid to the entity controlled by Mr. Fishburne if the Company does
not exercise the Option, if the Company does not meet certain other time
deadlines, or if the Company fails to match any bona fide third party offers for
the Rights. If, during the term of the Option, the Company takes certain
actions which will result in the Option becoming exclusive, exercises the
Option, or successfully matches any bona fide third party offers for the Rights,
then the Company will also incur additional obligations such as those with
respect to the financing and developing of the Rights.
The Company is a party to various other legal proceedings arising in the
ordinary course of its business. The Company does not currently believe that any
such proceedings will have a material adverse effect on the Company's operations
or financial condition.
On April 3, 1997, the Company entered into a Purchase and Sale Agreement
(as it has been amended, the "Library Sale Agreement") with Walt Disney
Pictures and Television, a subsidiary of The Walt Disney Company, to sell to
Walt Disney Pictures and Television substantially all of the films in the
Company's motion picture library and certain other assets (referred to herein
as the "Film Library Sale";"Disney" is used herein to refer to Walt Disney
Pictures and Television and/or its affiliates, including The Walt Disney
Company, as applicable). In exchange for the assets being sold to Disney,
Disney has agreed to relinquish its equity interest in the Company (555,556
shares of the Company's Common Stock and a warrant to purchase 150,000 shares
of the Company's Common Stock at an exercise price of $9.00 per share) and
cancel its outstanding loans to the Company (approximately $39,995,000 as of
September 30, 1997). In addition, Disney has agreed to assume with respect to
the films and rights therein being sold to Disney all residuals and
participation obligations, as well as all scheduled obligations relating to
the Company's existing exploitation agreements. Pursuant to the Library Sale
Agreement, Disney will pay $3,725,000 to the Company upon delivery of AN ALAN
SMITHEE FILM to Disney (a reduction of $1,275,000 from Disney's original
payment obligation pursuant to existing agreements between the Company and
Disney). To the extent that the Company receives any fixed cash minimum
guarantees with respect to AN ALAN SMITHEE FILM ("Excess Minimum Guarantees")
other than those minimum guarantees the Company has scheduled under existing
exploitation agreements with parties other than Disney, then the Company, at
the closing of the Film Library Sale, must account for and remit such Excess
Minimum Guarantees to Disney. The Company does not currently anticipate that
there will be any significant Excess Minimum Guarantees.
The film library being sold to Disney includes primarily all of the
Company's rights (except minimum guarantee payments) to the following eleven
motion pictures: MEDICINE MAN, TOMBSTONE, RENAISSANCE MAN, COLOR OF NIGHT, JUDGE
DREDD, THE SCARLET LETTER, NIXON, EVITA (excluding soundtrack rights), AMANDA,
THE SHADOW CONSPIRACY, and AN ALAN SMITHEE FILM. Disney will also retain
overages otherwise payable to the Company by Disney after January 1, 1997 with
respect to certain distribution rights to DIE HARD WITH A VENGEANCE previously
licensed to Disney. In addition, upon consummation of
10
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
the Film Library Sale, the Company's twenty-five film domestic distribution
arrangement with Disney, under which nine films have been delivered, will be
terminated.
The Film Library Sale is subject to numerous conditions, including, among
other things, the approval of the Company's stockholders. The Library Sale
Agreement and related Film Library Sale may also be terminated by the Company or
Disney in certain circumstances, including, among other things, upon failure to
consummate the Film Library Sale by December 24, 1997. Members of the Company's
Board of Directors who are also stockholders in the Company have agreed to vote
their shares in favor of the transaction in accordance with the terms of the
Library Sale Agreement.
On April 3, 1997, the Company also announced that it did not presently
intend to commence production on any additional motion pictures (although the
Library Sale Agreement does not preclude the Company, pending consummation of
the Film Library Sale, from commencing production on films that would not be
distributed by Disney) and that it was in the process of considering its
alternatives assuming consummation of the Film Library Sale to Disney.
On July 15, 1997, the Company entered into an Assignment Agreement (as it
has been amended, the "Assignment Agreement") with Twentieth Century Fox Film
Corporation ("Fox") to sell to Fox, subject to certain conditions, the Company's
rights in DIE HARD WITH A VENGEANCE in exchange for $11,250,000 in cash. The
Company owns DIE HARD WITH A VENGEANCE with Fox. Fox controls all sequel rights
to the film, as well as distribution rights to the film in the United States,
Canada and Japan (and certain additional minor territories), and worldwide in
certain ancillary media. Pursuant to the Assignment Agreement, the Company will
relinquish the right to receive overages from those territories and media for
which Fox controls distribution rights.
Fox will receive the Company's rights in DIE HARD WITH A VENGEANCE
subject to the terms of the Company's existing exploitation agreements
relating to such rights, including the Company's agreements with Disney. The
Company, which controlled distribution rights to DIE HARD WITH A VENGEANCE in
international territories other than those for which Fox controls
distribution rights, has previously granted Disney distribution rights to the
film in a portion of those international territories. Pursuant to the
Library Sale Agreement, the Company has agreed, upon consummation of the Film
Library Sale, to relinquish overages payable by Disney after January 1, 1997
with respect to DIE HARD WITH A VENGEANCE. Pursuant to the Assignment
Agreement, the Company was still entitled to receive any overages under
its existing exploitation agreements which relate to DIE HARD WITH A
VENGEANCE and are with parties other than Disney and Fox. However, as
indicated below, the Company subsequently sold substantially all of such
remaining rights to receive DIE HARD WITH A VENGEANCE overages.
Pursuant to the Assignment Agreement, Fox will continue to be responsible
for the payment of residuals relating to distribution of the film in those
territories for which Fox currently controls distribution rights, and, as the
Company's existing exploitation agreements expire (including the Company's
agreements with Disney) and the distribution rights in those territories revert
to Fox, Fox will become responsible for the payment of residuals in the
applicable territories covered by any exploitation
11
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
agreements. The Company, however, will continue to be responsible for all
participations due to profit participants in the film (other than those
associated with distribution of the film in the territories licensed to Disney,
for which Disney is responsible). The Company currently anticipates, subject
to, among other things, actual future revenues generated by the film, that the
Company's residuals and participation obligations with respect to such film will
not exceed approximately $812,000.
The sale of the Company's rights in DIE HARD WITH A VENGEANCE to Fox is
subject to several conditions including, among other things, consummation of the
Film Library Sale to Disney and applicable approval of the Company's
stockholders. If the Library Sale Agreement terminates, the Assignment
Agreement will automatically also terminate.
In June 1997, the Company instructed its financial advisor, Jefferson
Capital Group, Ltd., to solicit cash bids from qualified buyers for the
purchase of the Company's slate of twenty-one wholly-owned development
projects. The Company received an initial bid for the development projects
of $4,750,000 (plus the reimbursement of certain of the Company's costs
related to such projects) from Mr. Vajna. Additional qualified bids were
required to be at least fifteen percent higher than the initial bid and
submitted to the Company by noon, eastern time, on August 19, 1997. As no
additional qualified bids were received by the bidding deadline, Mr. Vajna
was the prevailing bidder. The sale of such development projects to Mr.
Vajna is subject to consummation of the Film Library Sale and the
transactions contemplated by the Assignment Agreement. As the parties to the
Merger (described below) negotiated the merger consideration on the basis of
a value for such development projects equal to Mr. Vajna's bid, such
development projects will merely be part of the assets of the Company at the
time of the Merger and no separate cash consideration will be paid to the
Company for such projects.
In September 1997, Mr. Vajna, Valdina Corporation N.V. ("Valdina"), CPEI
Acquisition, Inc. ("Buyer"), a Delaware corporation wholly owned by Mr. Vajna
and Valdina, and the Company entered into an Agreement of Merger (the "Merger
Agreement") pursuant to which Buyer will be merged with and into the Company and
the Company will become wholly owned by Mr. Vajna and Valdina (the "Merger").
Valdina, a corporation organized under the laws of The Netherlands Antilles is
indirectly beneficially owned 99.8% by Mr. Vajna and 0.2% by a trust which
benefits certain persons including the son of Mr. Vajna. Pursuant to the Merger
Agreement, at the effective time of the Merger (the "Effective Time"), each
share ("Share") of Company Common Stock (other than Shares owned by Mr. Vajna or
Valdina, treasury Shares, or Shares as to which statutory dissenters' rights are
perfected) will be converted into the right to receive $2.41 in cash (the
"Purchase Price"). The Purchase Price has been adjusted upwards from an
original price of $2.30 (the "Original Purchase Price") and is subject to
potential further upward adjustment as provided in the Merger Agreement. The
Merger is subject to the satisfaction or waiver of numerous conditions, and the
Merger Agreement may be terminated and the Merger abandoned in certain
circumstances.
12
<PAGE>
CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
The Company had a "first-look" arrangement with Oliver Stone and certain of
his affiliated entities ("Stone") pursuant to which Stone submitted the Company
all theatrical motion picture projects owned or controlled by Stone for the
Company's development and consideration of possible production and, as
consideration for Stone's submitting such projects to the Company, the Company
paid certain amounts annually to Stone for overhead and development. Disney
reimbursed the Company for all amounts payable to Stone through February 10,
1997. In September 1997, the Company entered into a Termination Agreement (the
"Termination Agreement") with Stone in order to terminate the "first-look"
arrangement between the Company and Stone and their respective obligations
thereunder. Pursuant to such agreement, the Company (i) transferred to Stone
all but one of the nineteen development projects funded by the Company under the
"first look" arrangement with Stone and (ii) made certain payments to, or for
the benefit of Stone. As a result of the Termination Agreement, the Company was
relieved of $961,000 in obligations the Company otherwise would have had with
respect to the "first-look" arrangement. In the event the Film Library Sale is
not consummated, Disney would be obligated to reimburse the Company for all
amounts paid to Stone after February 10, 1997 in connection with the
"first-look" arrangement (approximately $992,000).
In 1996, the Company and Disney entered into a Financing and Distribution
Agreement whereby the Company is financially obligated to pay to Disney the
lesser of 50% of the cost of the motion picture tentatively entitled "DEEP
RISING" or $22,500,000 (the "Cost Amount"), in exchange for (i) a 50% equity
participation in such motion picture and (ii) a sales fee for international
distribution of such motion picture. Pursuant to the Library Sale Agreement,
upon consummation of the Film Library Sale, the Company (a) will no longer have
any interest in the film as it will no longer serve as sales agent with respect
to the film, (b) will relinquish its equity participation in the film and sales
fee, (c) will remit to Disney all minimum guarantees received by the Company
with respect to DEEP RISING while it served as sales agent with respect to the
film and which were not previously remitted to Disney, and (d) will no longer be
obligated to pay the Cost Amount.
The Company and Summit Entertainment N.V. ("Summit N.V.") and Summit
Entertainment L.P. ("Summit L.P.") (collectively with their affiliates,
"Summit"), international sales agents unaffiliated with the Company, have
entered into agreements dated as of September 10, 1997 (the "Summit
Agreements") which primarily provide for (i) the purchase by Summit N.V., in
exchange for the payment of $400,000 to the Company, of the Company's rights
to receive any overages from international subdistributors (other than Disney
and Fox) pursuant to the Company's existing exploitation agreements with
respect to DIE HARD WITH A VENGEANCE (other than those overages relating to
exploitation agreements with respect to the territories of Italy and
Hungary), (ii) the purchase by Summit N.V., in exchange for the payment of an
additional $400,000 to the Company, of approximately $760,000 in
miscellaneous receivables outstanding as of September 30, 1997 (not including
any receivables relating to AN ALAN SMITHEE FILM), and (iii) the termination
of Summit's sales agency relationships with the Company and the settlement of
the Company's obligations in connection therewith in exchange for an aggregate
payment by the Company to Summit (which, pursuant to an additional agreement
with Summit, includes certain amounts payable to Summit with respect to a
past Company production) of approximately $827,000. The foregoing
transactions with Summit were consummated in November 1997.
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CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
In September 1997, Cinergi Productions Inc. (California) ("CPI"), the
wholly owned subsidiary of the Company which operated the Company's visual
effects facility, shut down the operations of such facility and, subsequent
thereto, transferred the assets thereof to an unaffiliated third party (the
"Purchaser") in consideration of the assumption by the Purchaser of
approximately $900,000 in obligations and liabilities of CPI, including
certain payroll and related obligations, the agreement of the Purchaser to
manage, on behalf of CPI, the resolution of certain other CPI liabilities and
obligations, and the contribution by the Purchaser of $200,000 thereto. In
connection with this transaction, CPI also assigned to the Purchaser all of
CPI's rights, duties and obligations under a production services agreement
relating to a motion picture for which CPI had been engaged to create visual
effects. In consideration of such assignment, the Purchaser agreed to
indemnify CPI in connection with any claims or actions initiated by any third
party with respect to the production services agreement.
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CINERGI PICTURES ENTERTAINMENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, 1997
NOTE 5 -- PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS No. 121). In April 1997, the Company
announced that (i) the Company had entered into the Library Sale Agreement with
Disney to sell to Disney substantially all of the films in the Company's motion
picture library and certain other assets, (ii) the Company did not presently
intend to commence production of any additional motion pictures, and (iii) the
Company was considering its alternatives assuming consummation of the Film
Library Sale. The Company's visual effects assets are not included in the Film
Library Sale. In light of the foregoing and due to operating losses of the
visual effects facility, the Company determined that a write-down to net
realizable value of the visual effects assets was required under SFAS No. 121.
Accordingly, the Company recognized a non-cash charge of $2,665,000 at June 30,
1997 for the impairment of the visual effects long-lived assets. The provision
for impairment was calculated based upon the excess of the carrying amount of
the visual effects assets over the estimated fair value of the visual effects
assets.
NOTE 6 -- SUBSEQUENT EVENTS AND OTHER MATTERS
On November 14, 1997, the Company paid off the outstanding balance under
its revolving credit facility (approximately $5,639,000 in principal and
accrued interest on such date). The commitment to lend under the credit
facility had previously expired in August 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS"
INCLUDING THOSE WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH STATEMENTS MAY CONSIST OF ANY STATEMENT OTHER THAN A
RECITATION OF HISTORICAL FACT AND CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "EXPECT," "ANTICIPATE," "ESTIMATE"
OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR
COMPARABLE TERMINOLOGY. THE READER IS CAUTIONED THAT ALL FORWARD-LOOKING
STATEMENTS ARE NECESSARILY SPECULATIVE AND THERE ARE CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY
FROM THOSE REFERRED TO IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY (i)
HAS ENTERED INTO AN AGREEMENT TO SELL SUBSTANTIALLY ALL OF THE FILMS IN THE
COMPANY'S MOTION PICTURE LIBRARY AND CERTAIN OTHER ASSETS TO WALT DISNEY
PICTURES AND TELEVISION, (ii) HAS ENTERED INTO AN AGREEMENT TO SELL THE
COMPANY'S RIGHTS IN DIE HARD WITH A VENGEANCE TO TWENTIETH CENTURY FOX FILM
CORPORATION, (iii) HAS CONCLUDED VARIOUS ARRANGEMENTS REGARDING CERTAIN OF
THE COMPANY'S ASSETS NOT INCLUDED IN THE TRANSACTIONS WITH DISNEY AND FOX,
AND (iv) HAS ENTERED INTO AN AGREEMENT WITH, AMONG OTHERS, ANDREW G. VAJNA,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS OF
THE COMPANY, REGARDING THE TERMS OF A MERGER THAT WOULD FOLLOW CONSUMMATION
OF THE TRANSACTIONS WITH DISNEY AND FOX. IN ADDITION, THE COMPANY ALSO HAS
ANNOUNCED THAT IT DOES NOT PRESENTLY INTEND TO COMMENCE PRODUCTION ON ANY
ADDITIONAL MOTION PICTURES. AS A RESULT, THE COMPANY'S RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED IN FUTURE PERIODS (INCLUDING
FOR THE YEAR ENDING DECEMBER 31, 1997). THE MERGER AGREEMENT AND THE
AGREEMENTS TO SELL SUBSTANTIALLY ALL OF THE FILMS IN THE COMPANY'S MOTION
PICTURE LIBRARY AND THE COMPANY'S RIGHTS IN DIE HARD WITH A VENGEANCE ARE
SUBJECT TO NUMEROUS CONDITIONS AND MAY ALSO BE TERMINATED IN CERTAIN
CIRCUMSTANCES. THE MERGER IS SUBJECT TO CONSUMMATION OF THE TRANSACTIONS
WITH DISNEY AND FOX. NO ASSURANCE CAN BE GIVEN THAT THE MERGER OR THE SALES
OF ASSETS TO DISNEY AND FOX WILL BE CONSUMMATED. ADDITIONAL RISKS AND
UNCERTAINTIES ARE DISCUSSED ELSEWHERE IN APPROPRIATE SECTIONS OF THIS REPORT
AND IN OTHER FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING, WITHOUT LIMITATION, THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1996, THE COMPANY'S CURRENT
REPORT ON FORM 8-K DATED APRIL 3, 1997, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON APRIL 4, 1997, THE COMPANY'S CURRENT REPORT ON FORM
8-K DATED JULY 9, 1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
JULY 17, 1997, THE COMPANY'S CURRENT REPORT ON FORM 8-K DATED AUGUST 25,
1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1997,
AND THE COMPANY'S CURRENT REPORT ON FORM 8-K DATED OCTOBER 2, 1997, FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1997. THE RISKS
HIGHLIGHTED ABOVE AND ELSEWHERE IN THIS REPORT SHOULD NOT BE ASSUMED TO BE
THE ONLY THINGS THAT COULD AFFECT FUTURE PERFORMANCE OF THE COMPANY. THE
COMPANY DOES NOT HAVE A POLICY OF UPDATING OR REVISING FORWARD-LOOKING
STATEMENTS AND THUS IT SHOULD NOT BE ASSUMED THAT SILENCE BY MANAGEMENT OF
THE COMPANY OVER TIME MEANS THAT ACTUAL EVENTS ARE BEARING OUT AS ESTIMATED
IN SUCH FORWARD-LOOKING STATEMENTS.
GENERAL
As indicated under Note 4 to "Notes to Condensed Consolidated Financial
Statements (unaudited)" under Item 1 above, in April 1997, the Company
entered into the Library Sale Agreement with Disney, to sell to Disney
substantially all of the films in the Company's motion picture library and
certain other assets, subject to certain conditions (including the approval
of the Company's stockholders) and termination in certain circumstances,
including upon failure to consummate the Film Library Sale by December 24,
1997. Upon consummation of the Film Library Sale, the Company's twenty-five
film domestic distribution arrangement with Disney, under which nine films
have been delivered, will be terminated. As also indicated under Note 4 to
"Notes to Condensed Consolidated
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Financial Statements (unaudited)" under Item 1 above, in July 1997, the Company
entered into the Assignment Agreement with Fox, to sell to Fox the Company's
rights in DIE HARD WITH A VENGEANCE in exchange for $11,250,000 in cash. Such
transaction is subject to several conditions including consummation of the Film
Library Sale and applicable approval of the Company's stockholders. The Company
has also announced that it does not presently intend to commence production on
any additional motion pictures. In addition to Note 4 to "Notes to Condensed
Consolidated Financial Statements (unaudited)" under Item 1 above, see the
Company's Annual Report on Form 10-K for its fiscal year ended December 31,
1996, its Current Report on Form 8-K dated April 3, 1997 filed by the Company
with the Securities and Exchange Commission on April 4, 1997, its Current Report
on Form 8-K dated July 9, 1997 filed by the Company with the Securities and
Exchange Commission on July 17, 1997, the Library Sale Agreement (Exhibit 2.2
hereto), two amendments to the Library Sale Agreement (Exhibits 2.3 and 2.4
hereto), the Assignment Agreement (Exhibit 2.5 hereto) and the amendment to the
Assignment Agreement (Exhibit 2.6 hereto), for additional information regarding
the Library Sale Agreement and the Assignment Agreement and the transactions
contemplated thereby (the "Asset Sales").
Following execution of the Library Sale Agreement and the Assignment
Agreement, the Company concluded a number of arrangements with respect to
assets which were not included as part of the Asset Sales, including: (i)
nineteen development projects (the "Stone Projects") funded by the Company
under its "first look" arrangement with Oliver Stone and certain of his
affiliates ("Stone"); (ii) visual effects equipment which was part of the
Company's visual effects facility located in Lenox, Massachusetts (the
"Visual Effects Facility"); (iii) the right to receive any overages from
international subdistributors (other than Disney and Fox) pursuant to the
Company's existing exploitation agreements with respect to DIE HARD WITH A
VENGEANCE (the "International DHWV Overages"); and (iv) approximately
$760,000 in miscellaneous receivables outstanding as of September 30, 1997
(the "Miscellaneous Receivables") (not including payments to be received with
respect to AN ALAN SMITHEE FILM.
In addition, the Company solicited bids for the purchase of the Company's
slate of twenty-one wholly-owned development projects for which Mr. Vajna's bid
of $4,750,000 (plus the reimbursement of certain of the Company's costs related
to such projects) was the prevailing bid. The sale of such development projects
to Mr. Vajna is subject to consummation of the Film Library Sale and the
transactions contemplated by the Assignment Agreement. As the parties to the
Merger (described below) negotiated the merger consideration on the basis of a
value for such development projects equal to Mr. Vajna's bid, such development
projects will merely be part of the assets of the Company at the time of the
Merger and no separate cash consideration will be paid to the Company for such
projects.
As indicated under Note 4 to "Notes to Condensed Consolidated Financial
Statements (unaudited)" under Item 1 above, in September 1997, Mr. Vajna,
Valdina, CPEI Acquisition, Inc. ("Buyer"), a Delaware corporation wholly
owned by Mr. Vajna and Valdina, and the Company entered into the Merger
Agreement which provides for the Merger of Buyer with and into the Company.
As a result of the Merger, the Company will become wholly owned by Mr. Vajna
and Valdina. Valdina, a corporation organized under the laws of The
Netherlands Antilles is indirectly beneficially owned 99.8% by Mr. Vajna and
0.2% by a trust which benefits certain persons including the son of Mr. Vajna.
Pursuant to the Merger Agreement, at the Effective Time of the Merger, each
Share of Company Common Stock (other than Shares owned by Mr. Vajna or Valdina,
treasury Shares, or Shares as to which statutory dissenters' rights are
perfected) will be converted into the right to receive the Purchase Price of
$2.41 in cash. The Purchase Price has been adjusted upwards from an Original
Purchase Price of $2.30 per Share and is subject to potential further upward
adjustment as provided in the Merger
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Agreement. See "Item 5: Other Information" under Part II of this Report. The
Merger is subject to the satisfaction or waiver of numerous conditions,
including, among others, approval of the Merger Agreement by the affirmative
vote of a majority of the Shares voted (including abstentions but excluding
broker non-votes) on a proposal to approve the Merger Agreement at a special
meeting of the Company's stockholders to be held in connection with the Merger
and the Asset Sales, without taking into account those Shares owned by Mr.
Vajna, Valdina, or any affiliate of Mr. Vajna or Valdina. The Merger is also
subject to several other conditions, including, among others, that the
transactions contemplated by both the Library Sale Agreement and the Assignment
Agreement are consummated in all material respects, and that the percentage of
Shares demanding appraisal does not exceed 15% of the Shares outstanding at the
Effective Time of the Merger. The Merger Agreement may also be terminated and
the Merger abandoned in certain circumstances including, among others, if the
parties to the Merger Agreement mutually agree, if the Company's agreement with
Disney regarding the Film Library Sale is terminated, or if the Merger is not
consummated by December 31, 1997.
The Company has filed with the Securities and Exchange Commission
preliminary proxy materials relating to the special meeting of the Company's
stockholders to be held in connection with the Merger and the Asset Sales.
Assuming all conditions to the Merger are satisfied, the Company currently
anticipates that the Merger will not be consummated until at least mid-December
1997. However, the Merger could be delayed beyond such time as a result of a
variety of factors including the time required to obtain necessary approvals.
Any delay of the Merger beyond December 31, 1997 would require the consent of
all parties to the Merger Agreement. See the Merger Agreement (Exhibit 2.1
hereto) for additional information regarding the Merger Agreement and the
transactions contemplated thereby.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
Feature film revenues decreased from $30,160,000 for the quarter ended
September 30, 1996 to $15,649,000 for the quarter ended September 30, 1997.
Feature film revenues for the quarter ended September 30, 1996 consisted mainly
of the domestic home video availability of NIXON, domestic and international
availability of AMANDA, and continuing domestic and foreign revenues from
TOMBSTONE and DIE HARD WITH A VENGEANCE. Feature film revenues for the quarter
ended September 30, 1997 resulted mainly from the domestic home video
availability of THE SHADOW CONSPIRACY and the receipt of overages with
respect to the soundtrack for EVITA (the "EVITA Soundtrack").
Amortization of film costs, residuals and participations decreased from
$28,543,000 for the quarter ended September 30, 1996 to $17,785,000 for the
quarter ended September 30, 1997 primarily due to the decrease in feature
film revenue recognized in the quarter ended September 30, 1997 as compared
to the quarter ended September 30, 1996. This amortization decrease was
reduced due to the transfer of all but one of the Stone Projects to Stone in
September 1997 as part of the settlement of the Company's "first look"
arrangement with Stone. See "Liquidity and Capital Resources." The Company
estimates the total projected revenues to be received from the exploitation
of a motion picture in all territories and media. As revenues from a motion
picture are recognized, the percentage of revenues recognized to total
projected revenues is applied to film costs for such motion picture to record
amortization. Where applicable, unamortized film costs for a picture are
written down to net realizable value for such picture based upon the
Company's appraisal of current market conditions.
Selling, general and administrative ("SG&A") expenses (excluding production
overhead costs capitalized to film costs) increased from $2,111,000 for the
quarter ended September 30, 1996 to $6,210,000 for the quarter ended September
30, 1997. The increase is due primarily to (i) no production overhead being
capitalized into film costs in the third quarter of 1997 in light of the
Company's agreements to sell the films in its motion picture library and the
Company's current intention not to
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commence production on additional motion pictures, (ii) severance payments to
certain executive officers and other employees, (iii) payments made by the
Company to terminate certain sales agency relationships (see "Liquidity and
Capital Resources") and (iv) costs and expenses incurred by the Company in
connection with negotiation of the Asset Sales and the Merger and the
preparation of related proxy materials. In 1996 and prior periods, the Company
capitalized production overhead incurred in connection with the production of
a motion picture by adding such costs to the capitalized film costs of the
motion picture. Production overhead being capitalized to film costs was
$1,179,000 for the third quarter of 1996. The total of SG&A expenses and
production overhead costs capitalized to film costs increased from $3,290,000
for the quarter ended September 30, 1996 to $6,210,000 for the quarter ended
September 30, 1997.
Interest expense increased from $0 for the quarter ended September 30,
1996 to $1,970,000 for the quarter ended September 30, 1997 primarily because
(i) no interest expense for the quarter ended September 30, 1997 was
capitalized to film costs in light of the Company's agreements to sell the
films in its motion picture library and the Company's current intention not
to commence production on additional motion pictures and (ii) the write off
of deferred expenses in connection with the August 31, 1997 expiration of the
commitment to lend under the Company's revolving credit facility. In 1996
and prior periods, the Company capitalized applicable interest expense
incurred in connection with the production of each motion picture. The
Company determined the amount of interest expense to be capitalized to each
motion picture in production by multiplying the average cumulative film cost
of each motion picture in a given period by the overall effective interest
rate paid by the Company on the aggregate amount of debt outstanding for such
period. Interest expense, including interest capitalized to film costs,
increased from $1,678,000 for the quarter ended September 30, 1996 to
$1,970,000 for the quarter ended September 30, 1997 primarily because of the
write off of deferred expenses in connection with the August 31, 1997
expiration of the commitment to lend under the Company's revolving credit
facility.
Interest income increased from $171,000 for the quarter ended September 30,
1996 to $483,000 for the quarter ended September 30, 1997 primarily due to
higher cash balances during the third quarter of 1997 compared to the third
quarter of 1996.
As a result of the above, the Company incurred a net loss for the quarter
ended September 30, 1997 of $9,833,000 as compared to a net loss of $294,000
for the quarter ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Feature film revenues decreased from $89,712,000 for the nine months ended
September 30, 1996 to $59,186,000 for the nine months ended September 30, 1997.
Feature film revenues for the nine months ended September 30, 1996 consisted
mainly of the domestic home video availability of THE SCARLET LETTER and NIXON,
international availability of NIXON, domestic and international availability of
AMANDA, and continuing domestic and international revenues from TOMBSTONE and
DIE HARD WITH A VENGEANCE. Feature film revenues for the nine months ended
September 30, 1997 resulted mainly from
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revenues from the theatrical release of THE SHADOW CONSPIRACY and the domestic
home video availability of EVITA and THE SHADOW CONSPIRACY and the receipt of
overages with respect to the EVITA Soundtrack.
Amortization of film costs, residuals and participations decreased from
$86,954,000 for the nine months ended September 30, 1996 to $62,198,000 for
the nine months ended September 30, 1997 primarily due to the decrease in
feature film revenue recognized for the nine months ended September 30, 1997
as compared to the nine months ended September 30, 1996. This amortization
decrease was reduced due to the transfer of all but one of the Stone Projects
to Stone in September 1997 as part of the settlement of the Company's "first
look" arrangement with Stone. See "Liquidity and Capital Resources."
SG&A expenses (excluding production overhead costs capitalized to film
costs) increased from $4,990,000 for the nine months ended September 30, 1996
to $14,071,000 for the nine months ended September 30, 1997. The increase is
due primarily to (i) no production overhead being capitalized into film costs
in the nine months ended September 30, 1997 in light of the Company's
agreements to sell the films in its motion picture library and the Company's
current intention not to commence production on additional motion pictures,
(ii) severance payments to certain executive officers and other employees,
(iii) payments made by the Company to terminate certain sales agency
relationships (see "Liquidity and Capital Resources"), (iv) costs and
expenses incurred by the Company in connection with negotiation of the Asset
Sales and the Merger and the preparation of related proxy materials, and (v)
payments made in connection with the settlement of certain litigation (see
"Item 1: Legal Proceedings under Part II of this Report). The total of SG&A
expenses and production overhead costs capitalized to film costs increased
from $9,261,000 for the nine months ended September 30, 1996 to $14,071,000
for the nine months ended September 30, 1997.
The provision for impairment of long-lived assets reflects a write down
of the Company's visual effects equipment under provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No.
121). In April 1997, the Company announced that (i) the Company had entered
into the Library Sale Agreement with Disney to sell to Disney substantially
all of the films in the Company's motion picture library and certain other
assets, (ii) the Company did not presently intend to commence production of
any additional motion pictures and (iii) the Company was considering its
alternatives assuming consummation of the Film Library Sale. The Company's
visual effects assets are not included in the Film Library Sale. In light of
the foregoing and due to operating losses of the Visual Effects Facility, the
Company determined that a write-down to net realizable value of the visual
effects assets was required under SFAS No. 121. Accordingly, the Company
recognized a non-cash charge of $2,665,000 at June 30, 1997 for the
impairment of the visual effects long-lived assets. The provision for
impairment was calculated based upon the excess of the carrying amount of the
visual effects assets over the estimated fair value of the visual effects
assets. In September 1997, the visual effects assets were sold for aggregate
consideration approximating the book value of such assets.
Interest expense increased from $176,000 for the nine months ended
September 30, 1996 to $4,362,000 for the nine months ended September 30, 1997
primarily because no interest expense for the nine months ended September 30,
1997 was capitalized to film costs in light of the Company's agreements to sell
the films in its motion picture library and the Company's current intention not
to commence production on additional motion pictures. Interest expense,
including interest capitalized to film costs, decreased from $5,015,000 for the
nine months ended September 30, 1996 to $4,362,000 for the nine months ended
September 30, 1997 as a result of lower average outstanding production loan
balances during the nine months ended September 30, 1997 compared to the
comparable period in 1996.
Interest income increased from $701,000 for the nine months ended September
30, 1996 to $1,300,000 for the nine months ended September 30, 1997 primarily
due to higher cash balances during the nine months ended September 30, 1997
compared to the nine months ended September 30, 1996.
As a result of the above, the Company incurred a net loss for the nine
months ended September 30, 1997 of $22,787,000 as compared to a net loss of
$1,647,000 for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a $50,000,000 revolving credit facility with The Chase
Manhattan Bank and a syndicate of lenders, under which the commitment to lend
expired August 31, 1997. In light of the Company's intention not to commence
production on any additional motion pictures, the Company did not seek to
extend the commitment to lend prior to its expiration, nor has the Company
sought to obtain a new credit facility either before or after expiration of
the commitment to lend under the Credit Facility. As
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of September 30, 1997, approximately $7,753,000 in borrowings were
outstanding under the Credit Facility, net of cash retained from the
collection of deposits of minimum guarantees. On November 14, 1997, the
Company paid off the outstanding balance under the Credit Facility
(approximately $5,639,000 in principal and accrued interest on such date).
The Company previously entered into term loan agreements with Disney 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 the term loan with respect to COLOR OF NIGHT which is personally
guaranteed by Mr. Vajna, certain other distribution rights related to other
motion pictures financed by Disney. The COLOR OF NIGHT term loan with a balance
of $4,510,000 at September 30, 1997 was scheduled to mature in May 1997,
however, Disney has agreed pursuant to the Library Sale Agreement that no
repayment of such loan or any other term loan is required unless the Library
Sale Agreement is terminated. None of the remaining currently outstanding term
loans with Disney mature in the ordinary course in the next twelve months.
At September 30, 1997, the aggregate amount outstanding under all term loans
from Disney plus accrued interest was approximately $39,995,000.
The Company also has an outstanding promissory note in favor of Valdina
which is currently due and payable and under which an aggregate of $3,511,000 in
principal and accrued interest was outstanding at September 30, 1997.
The Company and Disney have an arrangement whereby the Company is
financially obligated to pay Disney the lesser of 50% of the cost of the motion
picture currently entitled DEEP RISING or $22,500,000 (the "Cost Amount"), in
exchange for (i) a 50% equity participation in DEEP RISING, and (ii) a sales fee
for international distribution of such motion picture. Pursuant to the Library
Sale Agreement, upon consummation of the Film Library Sale, the Company (a) will
no longer have any interest in the film as it will no longer serve as sales
agent with respect to the film, (b) will relinquish its equity participation in
the film and sales fee, (c) will remit to Disney all minimum guarantees received
by the Company with respect to DEEP RISING while it served as sales agent with
respect to the film and which were not previously remitted to Disney, and (d)
will no longer be obligated to pay the Cost Amount. In the event the Film
Library Sale is not consummated, the Company currently anticipates that
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it will have obtained sufficient advances and minimum guarantees with respect to
its interest in the film to satisfy the Cost Amount.
The Company had a "first-look" arrangement with Stone pursuant to which
Stone submitted to the Company all theatrical motion picture projects owned or
controlled by Stone for the Company's development and consideration of possible
production. As consideration for Stone's submitting such projects to the
Company, the Company paid certain amounts annually to Stone for overhead and
development. Disney reimbursed the Company for all amounts payable to Stone
through February 10, 1997. In September 1997, the Company entered into a
Termination Agreement (the "Termination Agreement") with Stone in order to
terminate the "first-look" arrangement between the Company and Stone and their
respective obligations thereunder. Pursuant to such agreement, the Company (i)
transferred to Stone all but one of the Stone Projects and (ii) made certain
payments to, or for the benefit of Stone. As a result of the Termination
Agreement, the Company was relieved of $961,000 in obligations the Company
otherwise would have had with respect to the "first-look" arrangement. In the
event the Film Library Sale is not consummated, Disney would be obligated to
reimburse the Company for all amounts paid to Stone after February 10, 1997 in
connection with the "first-look" arrangement (approximately $992,000).
The Company and Summit Entertainment N.V. ("Summit N.V.") and Summit
Entertainment L.P. ("Summit L.P.") (collectively with their affiliates,
"Summit"), international sales agents unaffiliated with the Company, have
entered into agreements dated as of September 10, 1997 (the "Summit
Agreements") which primarily provide for (i) the purchase by Summit N.V., in
exchange for the payment of $400,000 to the Company, of the Company's rights
in the International DHWV Overages (other than those relating to exploitation
agreements with respect to the territories of Italy and Hungary), (ii) the
purchase by Summit N.V., in exchange for the payment of an additional
$400,000 to the Company, of the Miscellaneous Receivables, and (iii) the
termination of Summit's sales agency relationships with the Company and the
settlement of the Company's obligations in connection therewith in exchange
for an aggregate payment by the Company to Summit (which, pursuant to an
additional agreement with Summit, includes certain amounts payable to Summit
with respect to a past Company production) of approximately $827,000
(collectively, the "Summit Transactions"). The Summit Transactions were
consummated in November 1997.
At September 30, 1997, the Company had cash on hand of approximately
$26,073,000 (exclusive of restricted cash of approximately $5,169,000 consisting
primarily of amounts due to Disney from deposits received in connection with the
international distribution of DEEP RISING pursuant to the arrangement between
the Company and Disney described above).
As the Company does not presently intend to commence production on any
additional motion pictures, management of the Company has been implementing
reductions in personnel to achieve staff size commensurate with the Company's
current level of activity. The Company has reduced the number of its full
time employees by approximately 63% (to eleven employees) since the beginning
of 1997. The Company also reduced the amount of space it leases in its
corporate headquarters building by approximately sixty percent beginning
October 1, 1997. In addition, in September 1997, Cinergi Productions Inc.
(California) ("CPI"), the wholly owned subsidiary of the Company which
operated the Company's Visual Effects Facility, shut down the operations of
such facility and, subsequent thereto, transferred the assets thereof and
certain liabilities associated therewith to an unaffiliated third party,
Mass.Illusions LLC (the "Purchaser"). CPI transferred the assets of the
Visual Effects Facility to the Purchaser in consideration of the assumption
by the Purchaser of approximately $900,000 in obligations and liabilities of
CPI, including certain payroll and related obligations, the agreement of the
Purchaser to manage, on behalf of CPI, the resolution of certain other CPI
liabilities and obligations, and the contribution by the Purchaser of
$200,000 thereto. In connection with this transaction, CPI also assigned to
the Purchaser all of CPI's rights, duties and
22
<PAGE>
obligations under a production services agreement relating to a motion picture
for which CPI had been engaged to create visual effects. In consideration of
such assignment, the Purchaser agreed to indemnify CPI in connection with any
claims or actions initiated by any third party with respect to the production
services agreement.
The Company believes that its existing capital, funds from operations
and other available sources of capital (including cash on hand), will be
sufficient to enable the Company to fund its overhead related expenditures
and reduced level of activities pending consummation of the Asset Sales and
the Merger. Except for preparing for the special meeting of stockholders to
be held in connection with the proposed Asset Sales and Merger, and preparing
for the potential closings of the Asset Sales and the Merger, the Company
does not currently intend to engage in any significant business operations
pending consummation of the Asset Sales and the Merger. No determination has
been made by the Company as to its course of conduct in the event that the
Asset Sales and/or the Merger are not consummated, as the Company would
consider all strategic alternatives reasonably available to it at the time.
However, the Company anticipates that it is likely that significant
consideration would be given at any such time to a dissolution and winding up
of the Company pursuant to Delaware law. The Company might need to seek
additional sources of capital following the Merger or in the event the Asset
Sales and/or the Merger are not consummated, depending on the course of
action chosen to be taken, and the business operations, if any, chosen to be
conducted by the Company at such time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable, as the Securities and Exchange Commission phase-in date for
this Item with respect to the Company has not yet occurred.
23
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 25, 1997, the Company settled legal proceedings brought by
Laurence Fishburne and The LOA Productions, Inc., Mr. Fishburne's loan-out
corporation ("LOA"), against the Company, a subsidiary of the Company and
Randolph M. Paul, former Senior Vice President, Business Affairs and a former
Director of the Company (the "Fishburne Litigation"). The action, for breach of
oral contract, fraud and deceit, and civil conspiracy, was originally filed on
July 11, 1994. The plaintiffs had claimed that the Company entered into an oral
contract for Mr. Fishburne to appear in the motion picture, DIE HARD WITH A
VENGEANCE, but repudiated the contract the following day. Plaintiffs claimed
damages of $1,750,000, representing the fixed compensation to which they allege
they were entitled, additional compensatory damages of up to $350,000 and
general and punitive damages. Trial had been scheduled for August 25, 1997 in
Los Angeles Superior Court.
Pursuant to the terms of the settlement, the Company paid LOA $750,000
and entered into certain agreements with plaintiffs and an entity controlled
by Mr. Fishburne which provide the Company with a non-exclusive option (the
"Option") to acquire certain rights ("Rights") to a play and related
screenplay both written by Mr. Fishburne. The Company also established a
letter of credit in the amount of $600,000, the amount which must be paid to
the entity controlled by Mr. Fishburne if the Company does not exercise the
Option, if the Company does not meet certain other time deadlines, or if the
Company fails to match any bona fide third party offers for the Rights. If,
during the term of the Option, the Company takes certain actions which will
result in the Option becoming exclusive, exercises the Option, or
successfully matches any bona fide third party offers for the Rights, then
the Company will also incur additional obligations such as those with respect
to the financing and developing of the Rights.
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.
Not applicable.
ITEM 5. OTHER INFORMATION.
ADJUSTMENT OF MERGER CONSIDERATION TO $2.41 PER SHARE. As indicated above
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - General," certain events (described below) have occurred
between the date of the Merger Agreement and the date of the filing of this
Report which have resulted in an aggregate of $0.11 of adjustments to the
Original Purchase Price of $2.30 per Share, i.e., a Purchase Price, as of the
date of the filing of this Report, of
24
<PAGE>
$2.41 per Share.
The Merger Agreement provides that in the event the Company enters into
an agreement (the "Stone Agreement") prior to the Adjustment Date (A) to sell
five specified Stone Projects or (B) to settle its obligations pursuant to
its first look arrangement with Stone, there will be a positive adjustment (a
"Gross Adjustment") equal to the sum of (X) the aggregate purchase price, if
any, payable to the Company pursuant to the Stone Agreement, and (Y) the
aggregate amount of liabilities and other obligations assumed or forgiven by
the purchaser (or party or parties with which the Company settles its
obligations) pursuant to the Stone Agreement. The Adjustment Date is
generally the date which is ten business days prior to the special meeting of
stockholders to be held in connection with the Asset Sales and the Merger.
As a result of the settlement of the Company's "first look" arrangement with
Stone pursuant to the Termination Agreement, the Company has been relieved of
$961,000 in obligations it would otherwise have had to Stone under such
arrangement. This has resulted in a Gross Adjustment pursuant to the Stone
Agreement of $961,000, or approximately $.0745 per Share.
The Merger Agreement also provides that in the event the sum of (A) the
aggregate amount of all monies received by the Company (as royalties or
otherwise) in respect of the EVITA Soundtrack from September 2, 1997 through
the Adjustment Date and (B) the aggregate purchase price payable to the
Company pursuant to any agreement for the sale of the EVITA Soundtrack (an
"Evita Agreement") entered into by the Company prior to the Adjustment Date,
exceeds $1,500,000 (such excess being referred to herein as the "Soundtrack
Amount"), there will be a Gross Adjustment equal to the Soundtrack Amount.
After September 2, 1997, the Company received $1,760,000 in overages with
respect to the EVITA Soundtrack, resulting in a Gross Adjustment of $260,000
or approximately $.0201 per Share. The Company is currently in discussions
regarding the sale of the EVITA Soundtrack, however, no assurances can be
given that any such sale, or any Purchase Price adjustment resulting
therefrom, will occur.
In addition, the Merger Agreement provides that in the event the aggregate
amount of monies collected by the Company in connection with certain outstanding
accounts receivable (the "Non-Alan Smithee Receivables") from July 1, 1997
through the Adjustment Date (the "Measurement Period") is in excess of
$1,573,000 (such excess amount being referred to as the "Non-Alan Smithee
Receivables Amount"), there will be a Gross Adjustment equal to the Non-Alan
Smithee Receivables Amount. The Non-Alan Smithee Receivables do not include any
receivables relating to AN ALAN SMITHEE FILM, for which there is a different
potential adjustment. As all of the Non-Alan Smithee Receivables which have not
previously been collected (i.e., the Miscellaneous Receivables) were transferred
to Summit as part of the Summit Transactions, the aggregate amount of Non-Alan
Smithee Receivables collected by the Company during the Measurement Period and
the Non-Alan Smithee Receivables Amount have become fixed (and not subject to
further adjustment) at $1,743,000 and $170,000, respectively, resulting in an
additional Gross Adjustment of $170,000 or approximately $.0132 per Share. When
considered with adjustments (discussed above) resulting from the settlement of
the "first look" arrangement with Stone and the receipt by the Company of
$1,760,000 in overages with respect to the EVITA Soundtrack and taking into
account the parties' agreement as to rounding, the total adjustment to the
Original Purchase Price was $0.11 resulting in the adjusted Purchase Price of
$2.41 per Share.
The $2.41 Purchase Price is subject to potential further upward adjustment
in certain events specified in the Merger Agreement, including in the event
additional monies are collected with respect to the EVITA Soundtrack or if the
EVITA Soundtrack is sold. The Purchase Price will also be adjusted upwards in
the event the sum of certain prescribed adjustments pertaining to the (i) the
Company's selling, general and administrative expenses from July 1, 1997 through
the Adjustment Date, (ii) the Company's ability to collect certain receivables
relating to AN ALAN SMITHEE FILM from July 1, 1997 through the Adjustment Date,
and (iii) the amount of monies contributed by the Company to, or the amount of
expenses incurred by the Company on behalf of, CPI, or the Visual Effects
Facility which was
25
<PAGE>
operated by such subsidiary, from July 1, 1997 through the Adjustment Date, in
each case measured against certain specified amounts, results in a net positive
dollar amount.
Upon the occurrence of any subsequent event resulting in a Purchase Price
adjustment, the aggregate per share adjustment to the Purchase Price will, in
general terms, be calculated by dividing the aggregate dollar amount of the
adjustments by the total number of issued and outstanding Shares as of the
Adjustment Date (including Shares held by Mr. Vajna or Valdina, but excluding
the 555,556 Shares held by Disney which will be transferred to the Company as
part of the contemplated sale of substantially all of the films in the Company's
motion picture library to Disney), rounded off to the nearest whole penny.
Except for the adjustments set forth in the Merger Agreement, there are no other
possible positive adjustments to the Purchase Price. The Merger Agreement does
not provide for any downward adjustments to the Purchase Price.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Agreement of Merger, dated as of September 2, 1997, by and
among Andrew G. Vajna, Valdina Corporation N.V., CPEI
Acquisition Inc. and the Company. Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated August 25, 1997, filed with the Securities and Exchange
Commission on September 5, 1997.
2.2 Purchase and Sale Agreement, dated April 3, 1997, by and
between the Company and Cinergi Productions N.V. Inc. and
Walt Disney Pictures and Television Incorporated.
Incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated April 3, 1997, filed with
the Securities and Exchange Commission on April 4, 1997.
2.3 First Amendment to Purchase and Sale Agreement, dated as of
August 26, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K, dated August 25,
1997, filed with the Securities and Exchange Commission on
September 5, 1997.
2.4 Second Amendment to Purchase and Sale Agreement, dated as of
November 10, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Filed herewith.
2.5 Assignment Agreement, dated as of July 14, 1997, between
Twentieth Century Fox Film Corporation and the Company and
Cinergi Productions N.V. Inc. Incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated July 9, 1997, filed with the Securities and Exchange
Commission on July 17, 1997.
2.6 Amendment to Assignment Agreement, dated August 26, 1997,
between Twentieth Century Fox Film Corporation, the Company
and Cinergi Productions N.V. Inc. Incorporated by reference
to Exhibit 2.3 to the Company's Current Report on Form
26
<PAGE>
8-K, dated August 25, 1997, filed with the Securities and
Exchange Commission on September 5, 1997.
10.1 Termination Agreement, dated as of September 10, 1997,
between the Company and Cinergi Productions N.V. Inc., on
the one hand, and Ixtlan Corporation, Illusion Entertainment
Group, Quetzalcoatl, Inc. and Oliver Stone, on the other
hand. Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated October 2, 1997,
filed with the Securities and Exchange Commission on
October 9, 1997.
10.2 Severance Agreement, dated as of September 1, 1997, between
Warren Braverman, the Company, and Andrew G. Vajna. Filed
herewith.
10.3 Summit Agreements between, as applicable, the Company,
Cinergi Productions N.V. Inc., Cinergi Productions KFT,
Summit Export (UK) Ltd., Summit Entertainment N.V., and
Summit Entertainment L.P. Filed herewith.
10.4 Manex/Mass.Illusion Business Acquisition Agreement, dated
as of September 15, 1997, between Cinergi Productions Inc.
(California) and Mass.Illusions, LLC. Filed herewith.
27 Financial Date Schedule (filed electronically only).
Filed herewith.
b) Reports on Form 8-K.
The following reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1997:
Current Report on Form 8-K, dated July 9, 1997, filed by the Company
with the Securities and Exchange Commission on July 17, 1997
reporting under "Item 5 - Other Events": (i) execution of the
Assignment Agreement, and (ii) a change in the beneficial ownership
of the Company by Andrew G. Vajna.
Current Report on Form 8-K, dated August 25, 1997, filed by the
Company with the Securities and Exchange Commission on September 5,
1997 reporting under "Item 5 -- Other Events": (i) execution of the
Merger Agreement, (ii) execution of an amendment to the Library Sale
Agreement, (iii) settlement of the Company's litigation with
Laurence Fishburne and certain of his affiliates, (iv) execution of
an amendment to the Assignment Agreement, and (v) the reaching of an
agreement in principle with Summit regarding the sale to Summit of
the International DHWV Overages.
27
<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.
November 18, 1997 By: /s/ Warren Braverman
-------------------------------------
Warren Braverman, Executive Vice
President, Chief Operating Officer
and Chief Financial Officer, signing
both in his capacity as Executive
Vice President on behalf of
Registrant and as Chief Financial
Officer of Registrant
28
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Agreement of Merger, dated as of September 2, 1997, by and
among Andrew G. Vajna, Valdina Corporation N.V., CPEI
Acquisition Inc. and the Company. Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated August 25, 1997, filed with the Securities and Exchange
Commission on September 5, 1997.
2.2 Purchase and Sale Agreement, dated April 3, 1997, by and
between the Company and Cinergi Productions N.V. Inc. and
Walt Disney Pictures and Television Incorporated.
Incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated April 3, 1997, filed with
the Securities and Exchange Commission on April 4, 1997.
2.3 First Amendment to Purchase and Sale Agreement, dated as of
August 26, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K, dated August 25,
1997, filed with the Securities and Exchange Commission on
September 5, 1997.
2.4 Second Amendment to Purchase and Sale Agreement, dated as of
November 10, 1997, by and between the Company and Cinergi
Productions N.V. Inc. and Walt Disney Pictures and Television
Incorporated. Filed herewith.
2.5 Assignment Agreement, dated as of July 14, 1997, between
Twentieth Century Fox Film Corporation and the Company and
Cinergi Productions N.V. Inc. Incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated July 9, 1997, filed with the Securities and Exchange
Commission on July 17, 1997.
2.6 Amendment to Assignment Agreement, dated August 26, 1997,
between Twentieth Century Fox Film Corporation, the Company
and Cinergi Productions N.V. Inc. Incorporated by reference
to Exhibit 2.3 to the Company's Current Report on Form 8-K,
dated August 25, 1997, filed with the Securities and
Exchange Commission on September 5, 1997.
29
<PAGE>
10.1 Termination Agreement, dated as of September 10, 1997,
between the Company and Cinergi Productions N.V. Inc., on
the one hand, and Ixtlan Corporation, Illusion Entertainment
Group, Quetzalcoatl, Inc. and Oliver Stone, on the other
hand. Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated October 2, 1997,
filed with the Securities and Exchange Commission on
October 9, 1997.
10.2 Severance Agreement, dated as of September 1, 1997, between
Warren Braverman, the Company, and Andrew G. Vajna. Filed
herewith.
10.3 Summit Agreements between, as applicable, the Company,
Cinergi Productions N.V. Inc., Cinergi Productions KFT,
Summit Export (UK) Ltd., Summit Entertainment N.V., and
Summit Entertainment L.P. Filed herewith.
10.4 Manex/Mass.Illusion Business Acquisition Agreement, dated
as of September 15, 1997, between Cinergi Productions Inc.
(California) and Mass.Illusions, LLC. Filed herewith.
27 Financial Date Schedule (filed electronically only).
Filed herewith.
30
<PAGE>
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (this "AMENDMENT") is
dated as of this 10th day of November, 1997, by and between Cinergi Pictures
Entertainment Inc., a Delaware corporation, f/k/a/ Cinergi Productions, Inc.,
Cinergi Productions N.V. Inc., a Delaware corporation (collectively, "SELLER")
and Walt Disney Pictures and Television, a California corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller and Buyer entered into a Purchase and Sale Agreement dated
as of April 3, 1997 and that certain First Amendment to the Purchase and Sale
Agreement dated as of August 26, 1997 (the "FIRST AMENDMENT") (the Purchase and
Sale Agreement, as amended by the First Amendment, shall be referred to as the
"PURCHASE AGREEMENT"; capitalized terms used, but not otherwise defined herein,
shall have the meaning given to such terms in the Purchase Agreement); and
WHEREAS, Seller and Buyer each desire to amend certain terms of the Purchase
Agreement as set forth herein.
NOW, THEREFORE, based on the above premises and in consideration of the
mutual covenants and agreements contained herein, the parties agree as follows:
I. Amendment to Section 1.2(a). Section 1.2(a) is hereby amended by
deleting the phrase "November 22, 1997" appearing in the sixth (6th) line
and replacing it with the phrase "December 24, 1997".
II. Amendment to Section 2.4. Section 2.4(ii) is hereby amended by
deleting the reference to "An Alan Smithee Film".
III. Amendment with respect to "An Alan Smithee Film". Section 2.15
is hereby amended in its entirety to read as follows:
"2.15 "AN ALAN SMITHEE FILM". Seller shall complete the motion
picture entitled "An Alan Smithee Film" and fully deliver said
motion picture prior to Closing to Buyer in accordance with the
terms of the Alan Smithee Distribution Agreement and to each of
the foreign distributors who have entered into an Exploitation
Agreement including, without limitation, Existing Exploitation
Agreements with respect to said motion picture. As provided in
that certain Amendment to the Alan Smithee Distribution Agreement
dated as of September 17, 1997, as the same shall be amended to
reflect the provisions of this Section 2.15, upon delivery of "An
Alan Smithee Film" in compliance with the terms of the Alan
Smithee Distribution Agreement, as amended, Buyer shall pay to
Seller a sum of Three Million Seven Hundred Twenty Five Thousand
Dollars ($3,725,000), which payment (along with other minimum
guarantee payments received by Seller with respect to such motion
picture) shall be used by Seller to pay off the outstanding
principal and interest owing by Seller under the Credit,
Security, Pledge and Guaranty Agreement dated as of August 16,
1994, between Cinergi Productions N.V. Inc. and The Chase
Manhattan Bank, as Agent ("CHASE") (the "CHASE CREDIT
AGREEMENT"). Buyer agrees that Seller may retain (subject to
repayment in full of the Chase Credit Agreement) all fixed cash
minimum guarantees payable to Seller under Existing Exploitation
Agreements only for "An Alan Smithee Film" listed on Schedule
2.15 hereof. To the extent that Seller receives any fixed cash
minimum guarantees with respect to "An Alan Smithee Film" other
than those minimum guarantees listed on Schedule 2.15, then
Seller shall account for and remit such additional amounts to
Buyer on the Closing Date and thereafter in accordance with
Section 2.11 of this Agreement. Seller agrees that Seller will
not amend any of the terms or provisions of any of such Existing
Exploitation Agreements in any way that would decrease, delay or
otherwise
<PAGE>
adversely affect payment of any amounts (other than the minimum
guarantees provided for in such Existing Exploitation Agreements
as specified in Schedule 2.15 hereof) otherwise payable pursuant
to such Existing Exploitation Agreements."
IV. Amendment Regarding Participation Settlement Negotiations. A
new Section 2.17 shall be added as follows:
"2.17 PARTICIPATION SETTLEMENT NEGOTIATIONS. Seller has notified
Buyer that Seller is presently in settlement discussions with
certain third parties regarding participation claims asserted by
the third parties against Seller. Seller agrees to (1) notify
Buyer of any participation claims which may be asserted by any
third parties against Seller and (2) keep Buyer advised as to the
status of all such negotiations, discussions and claims,
including any legal proceedings, and will not object to Buyer's
attendance at or other participation in any such discussions,
negotiations or proceedings. Seller agrees that any payment made
by Seller or any agreement entered into by Seller to pay or
settle any amounts or claims which could be an assumed liability
of Buyer under the terms of Section 2.2 of this Agreement,
including without limitation, participation obligations, shall
require the prior written consent of the Buyer. If
notwithstanding the foregoing, Seller makes any payments, takes,
or omits to take, any action with respect to any legal
proceedings, or enters into a settlement agreement with respect
to any amounts or claims which could be an assumed liability and
which is not approved by Buyer, Seller's obligations with respect
to such payments or under any such agreement shall be Excluded
Liabilities for purposes of Section 2.2."
V. Amendment to Schedule A. The definition of "Accounts Receivable"
in Schedule A is hereby amended by deleting the third (3rd) sentence in
its entirety and replacing it with the following:
"Notwithstanding the foregoing, the term "Accounts Receivable"
shall expressly exclude (a) with respect to the motion picture
entitled "An Alan Smithee Film" all contractual minimum
guarantees payable pursuant to the Existing Exploitation
Agreements in the amounts specified on Schedule 2.15 hereof, and
(b) with respect to all other Pictures all contractual minimum
guarantees payable pursuant to a contract in existence as of
January 1, 1997 (the "EXCLUDED RECEIVABLES"); provided, however,
notwithstanding the foregoing, the term "Accounts Receivable"
shall include (x) the contractual minimum guarantees due with
respect to the motion pictures presently entitled, "Up Close and
Personal", "Deep Rising" a/k/a "Tentacles", and (y) the
contractual minimum guarantees due with respect to the motion
picture entitled "An Alan Smithee Film" payable pursuant to any
contract other than the Existing Exploitation Agreements listed
on Schedule 2.15 hereof."
VI. Amendment to Schedule A. The definition of "Smithee Amount" is
hereby deleted in its entirety.
VII. Counterparts. This Amendment may be executed simultaneously in
two or more counterparts, each of which will be deemed an original, but
all of which together will constitute one and the same instrument.
VIII. No Other Changes. Except as expressly modified by the
provisions of this Amendment, the Purchase Agreement shall remain
unchanged in all respects and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
CINERGI PICTURES ENTERTAINMENT INC.,
f/k/a CINERGI PRODUCTIONS, INC.
By: /s/ Warren Braverman
----------------------------------
Name: Warren Braverman
--------------------------------
Title: Executive Vice President
-------------------------------
CINERGI PRODUCTIONS N.V. INC.
By: /s/ Erick J. Feitshans
----------------------------------
Name: Erick J. Feitshans
--------------------------------
Title: Senior Vice President
-------------------------------
WALT DISNEY PICTURES AND TELEVISION
By: /s/ Robert Moore
----------------------------------
Name: Robert Moore
--------------------------------
Title: EVP, CFO
-------------------------------
To the extent that the rights of either of the undersigned are affected by
this Agreement, each of the undersigned acknowledges and consents to any such
modifications.
BUENA VISTA INTERNATIONAL, INC.
By: /s/ Jere R. Hausfater
----------------------------------
Name: Jere R. Hausfater
--------------------------------
Title: Sr. VP
-------------------------------
BUENA VISTA PICTURES DISTRIBUTION,
a division of ABC, INC.
By: /s/ Jere R. Hausfater
----------------------------------
Name: Jere R. Hausfater
--------------------------------
Title: Sr. VP
-------------------------------
<PAGE>
SCHEDULE 2.15
EXISTING EXPLOITATION AGREEMENTS FOR "AN ALAN SMITHEE FILM"
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
DATE OF MINIMUM
AGREEMENT LICENSOR LICENSEE TERRITORY MEDIA GUARANTEE
- --------- ------------- ------------------ ----------------- --------- ---------
<C> <S> <C> <C> <C> <C>
10/14/96 CPNVI Roadshow Australia TH/V/TV 350,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Belga Belgium TH/V/TV 90,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI UCD Croatia TH/V 30,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Intersonic Czech TH/V 25,000
- -------------------------------------------------------------------------------------
10/29/96 CPNVI UGC - PH France/Switzerland TH/V/TV 500,000
- -------------------------------------------------------------------------------------
11/17/96 CPNVI Tobis Germany TH/V/TV 1,000,000
- -------------------------------------------------------------------------------------
Summit UK Roadshow Greece TH/V/TV 50,000
- -------------------------------------------------------------------------------------
10/29/96 CPNVI Okura Enterp. Hong Kong TH/V/TV 110,000
- -------------------------------------------------------------------------------------
10/30/96 CPKFT Medusa Italy TH/V/TV 1,000,000
- -------------------------------------------------------------------------------------
10/23/96 CPNVI Gaga Japan TH/V/TV 1,111,111
- -------------------------------------------------------------------------------------
10/28/96 CPKFT Digital Media Korea (South) TH/V/TV 600,000
Corp.
- -------------------------------------------------------------------------------------
10/2/96 CPEI/CPNVI Buena Vista Latin America TH/V/TV 0
- -------------------------------------------------------------------------------------
10/29/96 CPNVI Picture Image Malaysia TH/V/TV 45,000
- -------------------------------------------------------------------------------------
10/27/96 CPNVI Jaguar Film Middle East TH/V 70,000
- -------------------------------------------------------------------------------------
1/23/97 CPNVI Solar Films Philippines TH/V/TV 50,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Best Film Poland TH/V 46,500
- -------------------------------------------------------------------------------------
1/22/97 Summit UK Prisvideo Portugal TH/V/TV 20,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI West Video Russia (C.I.S.) TH/V 35,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Scenecast Serbia TH/V 14,400
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Overseas Singapore TH/V 45,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Vesna Dist. Slovenia TH/V 15,000
- -------------------------------------------------------------------------------------
10/28/96 Summit UK Ster-Kinekor So. Africa TH/V/TV 100,000
- -------------------------------------------------------------------------------------
10/28/96 CPKFT Sogepaq S.A. Spain TH/V/TV 625,000
- -------------------------------------------------------------------------------------
10/23/96 CPNVI Big Film Taiwan TH/V/TV 450,000
- -------------------------------------------------------------------------------------
10/30/96 CPNVI Entertain Pictures Thailand TH/V/TV 60,000
- -------------------------------------------------------------------------------------
11/25/96 Summit UK Ozen Film Turkey TH/V/TV 50,000
- -------------------------------------------------------------------------------------
1/14/97 CPNVI EFD U.K. TH/V/TV 500,000
- -------------------------------------------------------------------------------------
10/2/96 CPEI/CPNVI Buena Vista United States TH/V/TV 3,725,000
- -------------------------------------------------------------------------------------
</TABLE>
CPEI = Cinergi Pictures Entertainment Inc.
CPNVI = Cinergi Productions N.V. Inc./Cinergi Productions N.V.
CPKFT = Cinergi Productions Kft.
Summit UK = Summit Export (UK Ltd.)
<PAGE>
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is entered into as of September
1, 1997, by and between Warren Braverman, an individual (the "Executive"),
Cinergi Pictures Entertainment Inc., a Delaware corporation (the "Company"), and
Andrew G. Vajna, an individual ("Vajna").
WHEREAS, Executive has been Chief Operating Officer, Executive Vice
President and Chief Financial Officer of the Company since March 1990;
WHEREAS, Executive and the Company formalized their relationship by
entering into that certain Restated Employment Agreement between the Company
(then known as "Cinergi Productions Inc.") and Executive, dated as of January 1,
1994, as amended by that certain letter agreement, dated as of December 16,
1994, by and between the Company and Executive, and by that certain Amendment to
Restated Employment Agreement, dated as of January 1, 1997, between the Company
and Executive (as amended, the Restated Employment Agreement is referred to
herein as the "Employment Agreement");
WHEREAS, the term of the Employment Agreement expires December 31, 1999;
WHEREAS, pursuant to that certain Stock Sale and Repurchase Agreement dated
as of January 1, 1994 by and between Executive and the Company, Executive
acquired six shares of the Company's common stock, which pursuant to a
subsequent stock split were converted into 372,341 shares of the Company's
common stock (the "Shares");
WHEREAS, Executive paid for such shares by paying an amount in cash equal
to the aggregate par value of such shares and by issuing to the Company a
Secured Recourse Promissory Note (the "Promissory Note") in the principal amount
of $450,000, bearing interest at the rate of 6% per annum and secured in
accordance with that certain Security and Stock Pledge Agreement, dated as of
January 1, 1994, by and between the Company and Executive (the "Security
Agreement");
WHEREAS, the Company has entered into an Agreement of Merger, dated as of
September 1, 1997, by and among Vajna, Valdina Corporation N.V., a Netherlands
Antilles corporation ("Valdina"), CPEI Acquisition Inc., a Delaware corporation
("Newco"), and the Company (the "Merger Agreement");
WHEREAS, pursuant to the terms of the Merger Agreement, Newco will be
merged (the "Merger") with and into the Company, with the Company surviving the
merger (the "Surviving Corporation");
WHEREAS, the Company and Executive mutually desire to terminate the
Employment Agreement and Executive's employment with the Company at the
Effective Time of the Merger (with the term "Effective Time," as used herein,
having the meaning given to such term in the Merger Agreement); and
WHEREAS, the parties hereto desire to set forth the terms of the
termination of the Employment Agreement and to make such other provisions as may
be appropriate with respect to the termination of Executive's employment in
connection with the consummation of the Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this agreement and the representations, conditions and promises hereinafter
contained, the parties hereto hereby agree as follows:
-1-
<PAGE>
1. DEFINITIONS. Capitalized terms used herein without definition shall
have the respective meanings assigned to such terms in the Employment Agreement.
2. TERMINATION OF EMPLOYMENT AGREEMENT. The Company and Executive
mutually agree to terminate the Employment Agreement and Executive's employment
with the Company effective, automatically and without any further action on the
part of the parties hereto, as of the Effective Time. The time of such
termination is referred to herein as the "Termination Date." Notwithstanding
anything in the Employment Agreement to the contrary, all of the terms and
provisions of the Employment Agreement (including, without limitation, all
provisions regarding termination and compensation upon termination) shall
terminate as of the Termination Date and neither the Company nor Executive will
have any further obligation to the other with respect to the Employment
Agreement or Executive's employment with the Company, except as hereinafter
expressly set forth in this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of Section 1.3 of the Employment
Agreement (Ownership of Properties) and Executive's rights under both that
certain Deferred Compensation Plan dated June 20, 1990 and that certain
Irrevocable Trust Under the Cinergi Pictures Entertainment Inc. Deferred
Compensation Plan, dated June 6, 1997, by and between the Company and City
National Bank (the "Rabbi Trust") shall survive the termination of the
Employment Agreement and the execution of the Release (as defined in Section 5
hereof).
3. CANCELLATION OF PROMISSORY NOTE. At the Termination Date, the Company
shall forgive and cancel the Promissory Note (including all principal and
accrued interest thereunder). Effective as of the Termination Date, pursuant to
Section 10.1 of the Security Agreement, the Obligations (as such term is defined
in the Security Agreement) shall be deemed terminated, the Security Agreement
shall terminate and the Shares shall be owned by Executive free and clear of all
liens, claims or encumbrances (other than restrictions imposed by federal or
state securities laws and other than that certain proxy granted to Vajna
pursuant to that certain letter agreement dated April 27, 1994 between the
Company and Executive (the "1994 Letter Agreement") and pursuant to Paragraph 7
of that certain Stock Sale and Repurchase Agreement dated January 1, 1994
between the Company and Executive) and shall be fully paid and non-assessable.
In connection with the forgiveness and cancellation of the Promissory Note, the
Company shall execute and deliver to the Executive all necessary and appropriate
documentation, including without limitation, the original Promissory Note marked
canceled and all certificates evidencing the Shares.
4. PAYMENTS TO THE EXECUTIVE. Upon termination of the Employment
Agreement at the Termination Date, Executive shall be paid by wire transfer as
instructed by Executive, subject to applicable legal wage withholdings and
deductions, an amount equal to (i) one hundred percent of the Fixed Annual
Compensation that would otherwise have been payable to Executive in the ordinary
course from the Termination Date through December 31, 1997 had the Employment
Agreement not been terminated at the Termination Date, plus (ii) $598,500
(representing fifty percent of the Fixed Annual Compensation that would
otherwise have been payable to Executive in the ordinary course from January 1,
1998 through December 31, 1999 had the Employment Agreement not been terminated
at the Termination Date), plus (iii) $24,000 (representing Automobile Benefits
that would otherwise have been payable to Executive in the ordinary course from
January 1, 1998 through December 31, 1999 had the Employment Agreement not been
terminated at the Termination Date), plus (iv) $24,000 (representing Health
Insurance Benefits that would otherwise have been payable to Executive in the
ordinary course from January 1, 1998 through December 31, 1999 had the
Employment Agreement not been terminated at the Termination Date), plus (v) an
amount equal to the product of (x) Executive's average daily Fixed Annual
Compensation for the year ending December 31, 1997, multiplied by (y) the
aggregate number of Executive's accrued (but unpaid) vacation days as of the
Termination Date, less (vi) $18,000
-2-
<PAGE>
(representing the principal amount of a non-interest bearing loan previously
extended by the Company to the Executive and which shall be deemed repaid at the
Termination Date as a result of such offset).
5. INDEMNIFICATION.
5.1 Vajna and the Company hereby jointly and severally agree that all
rights to indemnification now existing in favor of the Executive as provided in
the Company's Certificate of Incorporation and Bylaws, or in the certificate or
articles of incorporation, bylaws or similar documents of any subsidiaries of
the Company, in effect as of the date hereof shall, with respect to matters
occurring prior to the Effective Time, survive the Merger and continue in full
force and effect, and Vajna shall be obligated on a joint and several basis with
the Company with respect thereto. Vajna and the Company further agree that all
rights to indemnification in favor of Executive presently contained in any
indemnification agreement between Executive and the Company or any subsidiary of
the Company, as the case may be, shall also survive the Merger and continue in
full force and effect in accordance with the terms of such agreements, and may
be enforced by Executive against the Company or Vajna on a joint and several
basis.
5.2 In accordance with the earlier determination of Company's Board
of Directors and the opinion of Company's counsel, Company will continue to
advance and/or reimburse legal fees incurred by Executive in connection with the
investigations and/or litigation arising out of his work for Company and/or
Vajna and/or companies affiliated with Vajna to the extent permitted by law.
Vajna personally guarantees Company's payment of such fees. It is agreed that
fees incurred in connection with the current investigation and civil tax court
proceedings relating to Vajna's tax returns and/or Executive's deferred
compensation account at Company will be advanced and/or reimbursed pursuant to
the terms of this Agreement. Company will not be required to advance or
reimburse fees incurred by Executive in connection with personal legal issues,
if any, unrelated to Executive's work for Company and/or Vajna. The obligations
imposed by this paragraph shall be subject to the terms of the undertaking
attached hereto as Exhibit B and executed by Executive.
5.3 The Company agrees to maintain director and officer liability
insurance in effect covering Executive for a period of not less than three years
from the Effective Time.
6. RELEASES. At the Termination Date, the Company and Executive shall
enter into a Mutual Release containing the terms set forth in Exhibit "A"
hereto, in addition to other customary terms and conditions (the "Release").
The execution and delivery of the Release by each of the Company and Executive
shall be a condition precedent to the forgiveness and cancellation of the
Promissory Note as set forth in Section 3 hereof, the payment to Executive of
the aggregate amount set forth in Section 4 hereof, and the agreement of
Executive to the termination of the Company's obligations under the Employment
Agreement.
7. WAIVER OF RIGHT OF FIRST REFUSAL. Vajna hereby waives any rights
which he may have to purchase the Shares pursuant to the terms of the 1994
Letter Agreement and which might otherwise arise from the Merger.
8. REPRESENTATIONS AND WARRANTIES
8.1 The Company represents and warrants that this Agreement has been
duly authorized, executed and delivered by it and constitutes its legally valid
and binding obligation enforceable against the Company in accordance with its
terms, except (i) as its obligations may be affected by bankruptcy, insolvency,
reorganization, receivership, moratorium or similar laws, or by
-3-
<PAGE>
equitable principles relating to or limiting creditors' rights or remedies
generally, and (ii) that the remedies of specific performance, injunction,
and other forms of equitable relief are subject to certain tests of equity
jurisdiction, equitable defenses and the discretion of the court before which
any proceeding therefor may be brought. The Company further represents and
warrants that neither the execution and delivery, nor the performance of this
Agreement, by the Company, will conflict with, violate, or cause a default
under, the Company's Restated Certificate of Incorporation (as currently
existing and as it shall be amended and restated at the Effective Time) or
By-laws, any order, decree, judgment or award of any court or other tribunal
applicable to the Company, or any material mortgage, security agreement,
indenture, contract or other agreement to which the Company is a party or by
which it or its assets or properties may be bound or affected.
8.2 Each of Vajna and Executive represent and warrant to the other
and to the Company that this Agreement constitutes his legally valid and binding
obligation, enforceable in accordance with its terms except (i) as his
obligations may be affected by bankruptcy, insolvency, reorganization,
receivership, moratorium or similar laws, or by equitable principles relating to
or limiting creditors' rights or remedies generally, and (ii) that the remedies
of specific performance, injunction, and other forms of equitable relief are
subject to certain tests of equity jurisdiction, equitable defenses and the
discretion of the court before which any proceeding therefor may be brought.
Each of Vajna and Executive further represent and warrant to the other and to
the Company that neither the execution and delivery, nor the performance of this
Agreement by him, will conflict with, violate or cause a default under, any
order, decree, judgment or award of any court or other tribunal applicable to
him, or any material mortgage, security agreement, indenture, contract or other
agreement to which he is a party, or by which he or his assets are bound or
affected.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and shall be binding upon the successors, heirs, trustees, executors,
administrators and assigns of the parties to this Agreement, and each of them.
9.2 SEVERABILITY. Subject to the following sentence, should any one
or more of the terms, provisions, covenants or restrictions of this Agreement be
determined to be illegal or unenforceable, (i) the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated; and
(ii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any section of this Agreement
containing such provision held to be invalid, illegal or unenforceable that are
not themselves invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable. It is expressly understood and agreed that the provisions of
Sections 2, 3 and 4 hereof are fully integrated and constitute an indivisible
single agreement.
9.3 INDEPENDENT ADVICE FROM COUNSEL. Each of the parties has had the
opportunity to receive prior independent legal advice from legal counsel of his
or its choice with respect to the advisability of executing this Agreement.
Executive acknowledges that he has obtained legal counsel to advise him of his
rights under this Agreement, he has read and understands the terms of this
Agreement, and that he enters into this Agreement knowingly and intelligently of
his own free will, free of any undue influence.
-4-
<PAGE>
9.4 EXPENSES. All expenses incurred in connection with this
Agreement shall be paid by the party incurring such expense; provided, however,
that the Company shall reimburse the Executive for legal fees incurred in
connection with the termination of Executive's employment with the Company, up
to a maximum aggregate amount of $4,000; and provided further, that in the event
that any action, suit, or other proceeding is instituted to remedy, prevent, or
obtain relief from a breach of this Agreement, or arising out of a breach of
this Agreement, the prevailing party shall recover from the other party all of
such prevailing party's reasonable attorneys' fees and costs incurred in each
and every such action, suit, or other proceeding, including any and all appeals
or petitions, or enforcement of any judgment hereunder.
9.5 ASSIGNMENT. The respective rights and obligations of the parties
under this Agreement shall not be assignable without the prior written consent
of the other parties. This Agreement shall inure solely to the benefit of, and
be binding upon, the parties hereto.
9.6 ENTIRE AGREEMENT. This Agreement and the other agreements and
documents referred to herein set forth the entire understanding of the parties
relating to the subject matter hereof and supersede all prior agreements and
understandings, whether oral or written. Notwithstanding the foregoing, unless
and until the Termination Date, the Employment Agreement shall continue in full
force and effect. In the event of the death of Executive prior to the
Termination Date, this Agreement shall automatically terminate and become null
and void.
9.7 AMENDMENT; WAIVER. No attempted amendment, modification,
termination, discharge or change of this Agreement shall be valid and effective,
unless the parties shall unanimously agree in writing to such amendment. No
waiver of any provision of this Agreement shall be effective unless it is in
writing and signed by the party against whom it is asserted, and any such
written waiver shall only be applicable to the specific instance to which it
relates and shall not be deemed to be a continuing or future waiver.
9.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and, taken
together, shall constitute one and the same Agreement, which shall be binding
and effective as to the parties to this Agreement.
9.9 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California applicable
to agreements made and to be performed entirely in California without regard to
the principles of choice of law or conflicts of law of that State or of any
other jurisdiction.
9.10 PUBLICITY. The Company, Vajna and Executive shall mutually agree
on the text of any press release issued by the Company in connection with this
Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have approved and executed this
Agreement as of the date first above written.
/s/ WARREN BRAVERMAN
--------------------------------------------
Warren Braverman
/s/ ANDREW G. VAJNA
--------------------------------------------
Andrew G. Vajna
CINERGI PICTURES ENTERTAINMENT INC.
By: /s/ ANDREW G. VAJNA
------------------------------------------
Name: Andrew G. Vajna
Title: President and Chief Executive
Officer
-6-
<PAGE>
EXHIBIT "A"
1. Mutual Releases and Waivers.
1.1 In consideration of the terms and provisions of this Agreement,
including, without limitation the general releases and waivers given by the
Company herein, the Executive, on behalf of himself and his related
individuals and entities, if any, including, but not limited to, any
successors, heirs, assignees, affiliates and partners, and any and all
other related individuals and entities, if any, and each of them, shall and
does hereby forever relieve, release and discharge the Company, and its
respective predecessors, successors, heirs, assignees, owners,
shareholders, representatives, affiliates, parent corporations,
subsidiaries (whether or not wholly owned), divisions and partners, and
their respective officers, directors, agents, employees, servants,
executors, administrators, accountants, insurers, attorneys, and any and
all other related individuals and entities, if any (the "Cinergi Parties"),
from any and all claims, debts, liabilities, demands, obligations, liens,
promises, acts, agreements, costs and expenses (including, but not limited
to, attorneys' fees), damages, actions and causes of action, of whatever
kind or nature, including, without limitation, any statutory, civil or
administrative claim, or any claim, arising out of acts, whether known or
unknown, suspected or unsuspected, fixed or contingent, apparent or
concealed, based on, arising out of, related to or connected with the
Employment Agreement, the employment of the Executive on behalf of the
Company and its subsidiaries, the termination of such employment and any
other dealings of any kind between the Executive and the Company and/or its
subsidiaries occurring on or prior to the date hereof (collectively
referred to herein as the "Claims") and any and all facts in any manner
arising out of, related or pertaining to or connected with those Claims,
including, but not limited to, any claims arising from rights under
federal, state, and local laws relating to the regulation of federal or
state tax payments or accounting, federal or state laws which prohibit
discrimination on the basis of race, national origin, religion, sex, age,
marital status, handicap, perceived handicap, ancestry, sexual orientation,
or any other form of discrimination, or laws such as workers' compensation
laws, which provide rights and remedies for injuries sustained in the
workplace or any common law claims of any kind, including, but not limited
to, contract, tort, and property rights including, but not limited to,
breach of contract, breach of the implied covenant of good faith and fair
dealing, tortious interference with contract or current or prospective
economic advantage, fraud, deceit, breach of privacy, misrepresentation,
defamation, wrongful termination, tortious infliction of emotional
distress, loss of consortium, breach of fiduciary duty, violation of public
policy and any other common law claim of any kind whatever, any claims for
severance pay, sick leave, family leave, liability pay, vacation, life
insurance, bonuses, health insurance, disability or medical insurance or
any other fringe benefit or compensation, and all rights or claims arising
under the Employee Retirement Income Security Act of 1974 ("ERISA"), or
pertaining to ERISA regulated benefits.
1.2 In consideration of the terms and provisions of this Agreement,
including, without limitation, the general releases and waivers given by
the Executive herein, the Company, on behalf of itself and its related
individuals and entities, if any, including, but not limited to, any
predecessors, successors, heirs, assignees, owners, shareholders,
representatives, affiliates, parent corporations, subsidiaries (whether or
not wholly owned), divisions and partners, and their respective officers,
directors, agents, employees, servants, executors, administrators,
accountants, insurers, attorneys and any and all other related individuals
and entities, if any, and each of them, shall and does hereby forever
relieve, release and discharge the Executive, and his respective
A-1
<PAGE>
successors, heirs, assignees, affiliates, and partners, and any and all
other related individuals and entities, if any, from (i) any and all
Claims, (ii) any and all facts in any manner arising out of, related or
pertaining to or connected with those Claims, and (iii) any and all claims
arising from or relating to Executive's actions or omissions while, and in
his capacity, as an officer and/or director of Company and each subsidiary
of Company; provided, however, that such release of Executive shall not
extend to any claims (or Claims), known or unknown, suspected or
unsuspected, against Executive which arise out of facts which are finally
adjudged by a court of competent jurisdiction to be a willful breach of
fiduciary duty (and for which the personal liability of Executive is not
otherwise eliminated in accordance with Section 102(b)(7) of the Delaware
General Corporation Law) or a crime under any federal or state law or
regulation.
2. The Executive has not filed, and will not file at any time in the
future, any statutory, civil or administrative claim, complaint or charge of any
kind whatsoever with any state or federal court, administrative agency or
tribunal of any kind whatsoever concerning any subject matter connected with or
pertaining or relating to the Claims. The parties agree that the consideration
exchanged for the execution and delivery of this Agreement is contingent upon
this promise by Executive not to file any such claim, complaint or charge of any
kind whatsoever.
3. Nothing contained herein shall be deemed to effect Executive's rights
under the Rabbi Trust or release the Company from its obligations thereunder
prior to satisfaction in full by the Company of such obligations.
4. It is expressly understood that Section 1542 of the California Civil
Code provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor."
5. The parties expressly waive any and all rights under Section 1542 of
the Civil Code of the State of California, and any other federal or state
statutory rights or rules, or principles of common law or equity, or those of
any jurisdiction, government, or political subdivision, similar to Section 1542
("similar provision"), and acknowledge and agree that this waiver is an
essential and material term of this Agreement without which the consideration
given by the parties would not have been given. The parties may not invoke the
benefits of Section 1542 or any similar provision in order to prosecute or
assert in any manner any claims that are released hereunder.
6. Each of the parties has had the opportunity to obtain the advice of
legal counsel and is entering into this Agreement with knowledge and acceptance
of the effect of Section 1542 of the California Civil Code, which is the
extinction of any and all Claims of whatever nature, whether known or unknown.
7. Each of the parties represents and warrants that it is the owner of
the claims released hereunder, that it has not assigned or transferred any
portion of the claims released hereunder to any other individual, firm,
corporation or other entity, and that no other individual, firm, corporation or
other entity has any lien, claim or interest in any such claims. Each party
shall indemnify and defend and hold the other party harmless from and against
any claims arising out of, related to, or in connection with any
A-2
<PAGE>
such prior assignment or transfer, or any such purported assignment or transfer,
or any claims or other matters released or assigned in this Agreement.
8. In the event that any action, suit, or other proceeding is instituted
to remedy, prevent, or obtain relief from a breach of this Agreement, or arising
out of a breach of this Agreement, the prevailing party shall recover from the
other party all of such prevailing party's reasonable attorneys' fees and costs
incurred in each and every such action, suit, or other proceeding, including any
and all appeals or petitions, or enforcement of any judgment hereunder.
A-3
<PAGE>
EXHIBIT "B"
UNDERTAKING FOR ADVANCEMENT OF EXPENSES
---------------------------------------
To the Board of Directors of
Cinergi Pictures Entertainment Inc.:
Cinergi Pictures Entertainment Inc. (the "Corporation"), of which I am
Chief Operating Officer, Chief Executive Officer, Executive Vice President
and a Director, has been served with a subpoena (the "Subpoena") issued in
connection with a grand jury investigation (the "Investigation"). I
understand that the subject matter of the Investigation may relate to certain
federal and state tax aspects of various transactions involving the
Corporation and other entities.
In connection with the Investigation, I expect to incur certain costs
and expenses, including attorneys' fees ("Costs"), by reason of the fact that
I was an officer, director, employee or agent of the Corporation at the time
of the events underlying the Investigation. I have previously requested
such advancement as provided in the Corporation's Bylaws.
In accordance with Section 145(e) of the General Corporation Law of the
State of Delaware, I hereby undertake to repay to the Corporation any Costs
paid by it in advance of the final disposition of the above-described
matters, if it shall ultimately be determined that I am not entitled to be
indemnified by the Corporation as authorized by Section 145 of the General
Corporation Law of the State of Delaware.
Sincerely,
/s/ WARREN BRAVERMAN
-----------------------------
Warren Braverman
B-1
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual General Release is made as of the 17th
day of June 1997, by and among Cinergi Pictures Entertainment Inc., a
corporation orgranized and existing under the laws of Delaware, and Cinergi
Productions N.V. Inc., a corporation organized and operating under the laws of
Delaware, and all of their respective affiliates (collectively "Cinergi") , on
the one hand, and Summit Entertainment N.V., a corporation organized and
exisiting under the laws of the Netherland Antilles, and Summit Entertainment
L.P., a California Limited Partnership (collectively "Summit"), on the other,
relating to the motion picture "Broadway Brawler" (the "Picture").
RECITALS
A. Cinergi and Summit previously made and entered into that certain Sales
Agency Agreement dated as of 1 December 1993 ("Agreement") relating to various
motion pictures Cinergi produces for worldwide exploitation which Summit
provided foreign sales agency services to Cinergi.
B. Cinergi began principal photography on the Picture on 1 February 1997.
The Picture was shutdown on 27 February 1997 as a result of factors beyond
Cinergi's control. Cinergi transferred its rights to the Picture to a third
party and has no further right, title or interest in or to the Picture.
C. Cinergi and Summit wish to settle any disputes or claims which may
have arisen as a result of the shutdown of the Picture and from their business
dealings and relationships arising between them with respect thereto as set
forth in Summit's letter to Cinergi dated 29 May 1997 (the "Letter").
D. Each of the Parties to this Settlement Agreement desires to settle and
resolve any and all claims, disputes, issues or matters that exist between them
arising from the Picture as of the date of this Settlement Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
below, the Parties desire to, and hereby do, resolve their differences and agree
as follows:
1. RELEASE
1.1 RELEASED CLAIMS.
1.1.1 Upon receipt of the sums set forth in paragraph 2 hereof,
Summit hereby releases and forever discharges Cinergi, and all of Cinergi's
agents, predecessors, successors, attorneys, shareholders, officers, directors
and all other representatives of any or all of them, from
1.
<PAGE>
any and all claims, demands, actions, causes of action, controversies, losses
and damages, suspected or unsuspected, whether known or not known, that exist
as of the date of execution of this Settlement Agreement, relating to the
subject matters of the Picture, including without limitation any claim which
Summit now has or claims to have or at any time heretofore had, or which at
any time hereafter may have or claim to have against Cinergi relating to or
concerning the subject matters referred to in the Letter (the "Released
Claims").
1.1.2 Cinergi hereby releases and forever discharges Summit, and
all of Summit's agents, predecessors, successors, attorneys, shareholders,
officers, directors and all other representatives of any or all of them, from
any and all claims, demands, actions, causes of action, controversies, losses
and damages, suspected or unsuspected, whether known or not known, that exist as
of the date of execution of this Settlement Agreement, relating to the subject
matters of the Picture, including without limitation any claim which Cinergi now
has or claims to have or at any time heretofore had, or which at any time
hereafter may have or claim to have against Summit relating to or concerning the
subject matters referred to in the Letter.
1.2 With respect to the Released Claims, all rights under California Civil
Code Section 1542, are hereby expressly waived by the Parties, and each of them
notwithstanding any provision to the contrary. Section 1542 provides as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
The Parties, and each of them, and their representatives, heirs and assigns
expressly waive and release any right or benefit which they have or may have
under Section 1542 of the Civil Code of the State of California, to the fullest
extent that they may waive all such rights and benefits pertaining to the
matters relating to the Picture which are released herein. It is the intention
of the Parties, and each of them, through this Settlement Agreement, and with
the advice of counsel, to fully, finally and forever settle and release all such
matters, and all claims relative thereto, in furtherance of such intention.
2. SETTLEMENT TERMS
2.1 PAYMENT. Cinergi shall cause to be paid to Summit the sum of One
Hundred Thousand Dollars ($100,000) promptly upon Summit's execution of this
Settlement Agreement.
3. CONFIDENTIALITY
3.1 The Parties hereto, and their officers, directors, representatives,
agents, employees, and attorneys shall not disclose, directly or indirectly, any
of the financial terms of the Settlement
2.
<PAGE>
agreement, which are confidential. Notwithstanding the foregoing, the Parties
shall be able to disclose the terms of the Settlement Agreement as necessary
with respect to their legal and financial affairs. In such instance, the
Parties shall inform any recipients of such information that the financial
terms of the settlement must remain confidential.
4. MISCELLANEOUS PROVISIONS
4.1 In order to carry out the terms and conditions of this Settlement
Agreement, the Parties agree to promptly execute upon reasonable request any and
all documents and instruments necessary to effectuate the terms of this
Settlement Agreement.
4.2 The Parties agree and acknowledge that this Settlement Agreement
represents a settlement of disputed claims and that, by entering into this
Settlement Agreement no Party admits or acknowledges that they committed any
wrongdoing on their part.
4.3 This Settlement Agreement is the entire agreement between the Parties
with respect to the Released Claims and supersedes all prior and contemporaneous
oral and written agreements and discussions pertaining to the Released Claims.
This Settlement agreement may be amended only by an agreement in writing.
4.4 This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives,
successors, trustees in bankruptcy, and assigns and each and every entity which
now or ever was a division, parent, successor, predecessor or subsidiary for
each Party and its respective legal successors and assigns.
4.5 The Parties represent and warrant that each of them have not assigned
all or any portion of any claim pertaining to the Released Claims to any person
or entity. In the event any claims are made by any third persons or entities
based upon any purported assignment or any such liens or claims are asserted in
connection with the Released Claims or proceeds of the Settlement Agreement,
then the Party who has breached his representation or warranty contained herein
agrees to indemnify and hold harmless the other Party from any said claims being
made.
4.6 In the event that any covenant, condition or other provision herein
contained is held to be invalid, void or illegal by any Court of competent
jurisdiction, the same shall be deemed severable from the remainder of this
Settlement Agreement and shall in no way affect, impair or invalidate any other
covenant, condition or other provision shall be deemed invalid due to its scope
or breadth, such covenant, condition or other provision shall be deemed valid to
the extent of the scope or breadth permitted by law.
4.7 No breach of any provision hereof can be waived unless in writing.
Waiver of any one breach of any provision hereof shall not be deemed to be a
waiver of any other breach of the
3.
<PAGE>
same or any other provision hereof. This Settlement Agreement may be amended
only by a written agreement executed by each of the Parties hereto.
4.8 The Parties hereto, and each of them, represent and declare that in
executing this Settlement Agreement, they rely solely upon their own judgement,
belief and knowledge, and on the advice and recommendations of their own
independently selected counsel, concerning the nature, extent and duration of
their rights and claims and that they have not been influenced to any extent
whatsoever in executing the same by any representations or statements covering
any matters made by any of the Parties hereto or by any person representing them
or any of them. The Parties acknowledge that no Party hereto nor any of their
representatives have made any promise, representation or warranty whatsoever,
written or oral, as any inducement to enter into this Settlement Agreement,
except as expressly set forth in this Settlement Agreement.
4.9 The Parties hereto or responsible officer or representative thereof,
and each of them, further represent and warrant that they have carefully read
this Settlement Agreement and know and understand the contents thereof, and that
they signed this Settlement Agreement freely and voluntarily. Each of the
representatives executing this Settlement Agreement on behalf of their
respective corporations or partnerships is empowered to do so and thereby binds
his respective corporation or partnership.
4.10 No party (nor any officer, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any
other party regarding any fact relied upon in entering into this Settlement
Agreement, and each party does not rely upon any statement, representation or
promise of any other party (or any officer, agent, employee, representative, or
attorney of or for any other party) in executing this Settlement Agreement, or
in making the settlement provided for herein, except as expressly stated int his
Settlement Agreement.
4.11 Each party to this Settlement Agreement has made such investigation of
the facts pertaining to this settlement and this Settlement Agreement and of all
matters pertaining thereto as he or it deems necessary.
4.12 In entering into this Settlement Agreement and the settlement provided
for herein, each party assumes the risk of any misrepresentation, concealment or
mistake. If any party should subsequently discover that any fact relied upon by
him or it in entering into this Settlement Agreement is untrue, or that any fact
was concealed from him or it, or that his/its understanding of the facts or of
the law was incorrect, such party shall not be entitled to any relief in such
connection or otherwise, including, without limiting the generality of the
foregoing, any alleged right or claim to set aside or rescind this Settlement
Agreement. This Settlement Agreement is intended to be and is final and binding
between the Parties hereto with respect to the Released Claims, regardless of
any claims of misrepresentation, promise made without the intention of
performing, concealment of fact, mistake of fact or law, or of any other
circumstance whatsoever.
4.
<PAGE>
4.13 Each of the Parties is aware that he/it my hereafter discover claims
or facts in addition to or different from those he or it now knows or believes
to be true with respect to the Released Claims. Nevertheless, it is the
intention of the parties to fully, finally and forever settle and release the
Released Claims, which do now exist, may exist, or heretofore have existed
between them.
4.14 Each term of this Settlement Agreement is contractual and is not
merely a recital.
4.15 Whenever the context so requires, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
4.16 The subject headings of the sections, paragraphs and subparagraphs of
this Settlement Agreement are included for convenience only, and shall not
affect the construction or interpretation of any of its provisions.
4.17 This Settlement Agreement has been jointly prepared and negotiated by
counsel for each of the Parties, and the Parties agree that this Settlement
Agreement shall be construed as a whole according to its fair meaning and is not
to be strictly construed for or against either of the Parties hereto.
4.18 The Parties acknowledge and agree that they each have been
represented by separate and independent legal counsel and have relied on
counsel of their own choosing at all stages of the negotiation, preparation
and drafting of this Settlement Agreement.
4.19 Each Party further acknowledges that this Settlement Agreement, has
been explained to each by their respective counsel, and that each Party fully
understands the contents and legal effect of said documents. The Parties
further acknowledge and agree that they enter into this Settlement Agreement
free from duress, fraud, undue influence, coercion, or oppression of any kind.
5. NOTICES
5.1 Any written notice, demand, request or communication that any Party
desires or is required to give to or serve on the other Party or any other
person pursuant to the Settlement Agreement shall be in writing and either:
5.1.1 Sent by prepaid first-class mail; or
5.1.2 Sent by prepaid one-day early morning Express Mail, Federal
Express, or similar next day morning delivery service.
5.2 Notices, demands, requests, consents, approvals, or other such written
communications are conclusively deemed received:
5.
<PAGE>
5.2.1 Five (5) business days after they are mailed if service or
delivery is made pursuant to subpart 5.1.1 above; or
5.2.2 Two (2) business days after transmitted if they are served
or delivered pursuant to subpart 5.1.2 above.
5.3 The date on which the last addressee is deemed to have received the
notice, demand, request, consent, approval or communications shall be deemed the
date of receipt by the Party to whom it is given to or served.
5.4 Any notice, demand, request, consent, approval, or communication that
either Party desires or is required to give to the other Party is ordered to be
addressed and served on or delivered to the other Party at the addresses set
forth below. Any Party may change his or her address by notifying the other
Parties of their change of address(es).
The address for Cinergi is as follows:
Cinergi Pictures Entertainment Inc. and
Cinergi Productions N.V. Inc.
2308 Broadway
Santa Monica, California 90404
Attn: Erick J. Feitshans, Esq.
Facsimile: (310)828-3861
With a copy to:
Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310)553-7068
The address for Summit is as follows:
Summit Entertainment L.P.
2308 Broadway
Santa Monica, California 90404
Attn: Andrew Matosich, Esq.
Facsimile: (310)828-4132
With a copy to:
6.
<PAGE>
Proskauer Rose Goetz & Mendelsohn LLP
2121 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attn: Scott P. Cooper, Esq.
6. CHOICE OF LAW/ATTORNEY'S FEES
6.1 This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and governed by the
laws of the State of California. Subsequent changes in California law and
federal law through legislation or judicial interpretation that creates or finds
additional or different rights and obligations of the Parties shall not affect
this Settlement Agreement.
6.2 This Settlement Agreement and its validity, construction and effect
shall be governed by the laws of the State of California applicable to contracts
wholly to be performed therein. In the event one of the Parties hereto
institutes any proceeding in connection with or concerning the interpretation or
enforcement of this Settlement Agreement, the prevailing Party shall be entitled
to recover all reasonable outside attorney's fees, costs and expenses actually
incurred in connection with such proceedings.
7. SEVERABILITY
7.1 Nothing contained herein shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any of the provisions contained herein and any present or future
statue, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but the provision of this
Settlement Agreement which is affected shall be curtailed and limited to the
extent necessary to bring it within the requirements of the law. All of the
provisions of this Settlement Agreement are intended to be distinct and
severable.
8. EXECUTION
8.1 This Settlement Agreement may be executed in counterparts and when
each Party has signed and delivered at least one such counterpart to each of the
other Parties, each counterpart shall be deemed an original, and all
counterparts taken together shall constitute one and the same
7.
<PAGE>
agreement, which shall be binding and effective as to all Parties. This
Settlement Agreement may be executed via facsimile signatures, which shall have
the same force and effect as if they were original signatures.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its or his name, respectively and each
warrants they have the authority to sign in their representative capacity.
CINERGI PICTURES
ENTERTAINMENT INC.
Dated: 7/24/97 By: /s/ ERICK J. FEITSHANS
--------------- ---------------------------------
Erick J. Feitshans
Its: Vice President
-------------------------------
CINERGI PRODUCTIONS N.V. INC.
Dated: 7/24/97 By: /s/ ERICK J. FEITSHANS
--------------- ---------------------------------
Erick J. Feitshans
Its: Vice President
-------------------------------
SUMMIT ENTERTAINMENT N.V.
Dated: 7/29/97 By: /s/ LOURDES GIRIGORI-PENZO
--------------- ---------------------------------
Lourdes Girigori-Penzo
Its: Managing Director
--------------------------------
SUMMIT ENTERTAINMENT L.P.
Dated: 7/23/97 By: /s/ R. HAYWARD
--------------- ---------------------------------
R. Hayward
Its: Executive Vice President
--------------------------------
8.
<PAGE>
SETTLEMENT, MUTUAL RELEASE, AND TERMINATION AGREEMENT
This Settlement Agreement and Mutual General Release is made as of the 10th
day of September, 1997, by and among Cinergi Pictures Entertainment Inc., a
corporation orgranized and existing under the laws of Delaware, and Cinergi
Productions N.V. Inc., a corporation organized and operating under the laws of
Delaware, and all of their respective affiliates (collectively "Cinergi") , on
the one hand, and Summit Entertainment N.V., a corporation organized and
exisiting under the laws of the Netherland Antilles, and Summit Entertainment
L.P., a California Limited Partnership (collectively "Summit"), on the other,
relating to the sales agency between Summit and Cinergi (the "Services").
RECITALS
A. Cinergi and Summit previously made and entered into that certain Sales
Agency Agreement dated as of 1 December 1993 and amended from time-to-time
("Agreement") relating to various motion pictures Cinergi produces for worldwide
exploitation which Summit provided foreign sales agency services to Cinergi.
B. Cinergi has decided to wind up its production and worldwide
exploitation of theatrical motion pictures, and has entered enter an agreement
in principle with the Walt Disney Company ("Disney") to acquire virtually all of
Cinergi's library of motion pictures.
C. Cinergi and Summit wish to terminate the Agreement and to settle any
disputes or claims which may have arisen or exist between them arising from the
Agreement and the Services as of the date of this Settlement Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
below, the Parties desire to, and hereby do, resolve their differences and agree
as follows:
1. RELEASE
1.1 RELEASED CLAIMS.
1.1.1 Upon its receipt of the sums set forth in paragraph 2
hereof, Summit hereby releases and forever discharges Cinergi, and all of
Cinergi's agents, predecessors, successors, attorneys, shareholders, officers,
directors and all other representatives of any or all of them, from any and all
claims, demands, actions, causes of action, controversies, losses and damages,
suspected or unsuspected, whether known or not known, that exist as of the date
of execution of this Settlement Agreement, relating to the subject matters of
the Agreement, including without limitation any claim which Summit now has or
claims to have or at any time heretofore had, or which at any time hereafter may
have or claim to have against Cinergi relating to or Cinergi's performance
arising out of or related to the Agreement ("Summit's Claims").
1.
<PAGE>
1.1.2 Cinergi hereby releases and forever discharges Summit, and
all of Summit's agents, predecessors, successors, attorneys, shareholders,
officers, directors and all other representatives of any or all of them, from
any and all claims, demands, actions, causes of action, controversies, losses
and damages, suspected or unsuspected, whether known or not known, that exist as
of the date of execution of this Settlement Agreement, relating to the subject
matters of the Agreement, including without limitation any claim which Cinergi
now has or claims to have or at any time heretofore had, or which at any time
hereafter may have or claim to have against Summit relating to or concerning
Summit's performance arising out of or related to the Agreement, including the
Services ("Cinergi's Claims"). (Summit's Claims and Cinergi's Claims are
subsequent referred to as the "Released Claims".)
1.2 With respect to the Released Claims, all rights under California Civil
Code Section 1542, are hereby expressly waived by the Parties, and each of them
notwithstanding any provision to the contrary. Section 1542 provides as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
The Parties, and each of them, and their representatives, heirs and assigns
expressly waive and release any right or benefit which they have or may have
under Section 1542 of the Civil Code of the State of California, to the fullest
extent that they may waive all such rights and benefits pertaining to the
Released Claims. It is the intention of the Parties, and each of them, through
this Settlement Agreement, and with the advice of counsel, to fully, finally and
forever settle and release all such matters, and all claims relative thereto, in
furtherance of such intention.
2. SETTLEMENT TERMS
2.1 PAYMENT IN LIEU OF FEES. Within five (5) business days of Summit's
the execution of this Settlement Agreement, Cinergi shall cause to be paid to
Summit the sum of nine hundred twenty-six two hundred seventy-nine United States
dollars (US$926,279), upon Summit's receipt of which the Agreement is deemed
terminated.
2.2 PAYMENT OF CONTINUING EXPENSES. Within fifteen (15) days of its
receipt of Summit's customary claim for reimbursement of distribution expenses,
Cinergi shall cause to be paid to Summit all distribution expenses claimed
thereon which Cinergi is required to reimburse Summit pursuant to the terms of
the Agreement. Cinergi is not obligated to pay any such distribution expenses
incurred after the date that Disney assumes the liability for the same, and
Summit shall thereafter claim reimbursement from, and Cinergi shall ensure that
reimbursement is paid by, Disney.
2.
<PAGE>
3. CONFIDENTIALITY
3.1 The Parties hereto, and their officers, directors, representatives,
agents, employees, and attorneys shall not disclose, directly or indirectly, any
of the financial terms of the Settlement agreement, which are confidential.
Notwithstanding the foregoing, the Parties shall be able to disclose the terms
of the Settlement Agreement as necessary with respect to their legal and
financial affairs. In such instance, the Parties shall inform any recipients of
such information that the financial terms of the settlement must remain
confidential.
4. MISCELLANEOUS PROVISIONS
4.1 In order to carry out the terms and conditions of this Settlement
Agreement, the Parties agree to promptly execute upon reasonable request any and
all documents and instruments necessary to effectuate the terms of this
Settlement Agreement.
4.2 The Parties agree and acknowledge that this Settlement Agreement
represents a settlement of disputed claims and that, by entering into this
Settlement Agreement no Party admits or acknowledges that they committed any
wrongdoing on their part.
4.3 This Settlement Agreement is the entire agreement between the Parties
with respect to the Released Claims and supersedes all prior and contemporaneous
oral and written agreements and discussions pertaining to the Released Claims.
This Settlement agreement may be amended only by an agreement in writing.
4.4 This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives,
successors, trustees in bankruptcy, and assigns and each and every entity which
now or ever was a division, parent, successor, predecessor or subsidiary for
each Party and its respective legal successors and assigns.
4.5 The Parties represent and warrant that each of them have not assigned
all or any portion of any claim pertaining to the Released Claims to any person
or entity. In the event any claims are made by any third persons or entities
based upon any purported assignment or any such liens or claims are asserted in
connection with the Released Claims or proceeds of the Settlement Agreement,
then the Party who has breached his representation or warranty contained herein
agrees to indemnify and hold harmless the other Party from any said claims being
made.
4.6 In the event that any covenant, condition or other provision herein
contained is held to be invalid, void or illegal by any Court of competent
jurisdiction, the same shall be deemed severable from the remainder of this
Settlement Agreement and shall in no way affect, impair or invalidate any other
covenant, condition or other provision shall be deemed invalid due to its scope
or breadth, such covenant, condition or other provision shall be deemed valid to
the extent of the scope or breadth permitted by law.
3.
<PAGE>
4.7 No breach of any provision hereof can be waived unless in writing.
Waiver of any one breach of any provision hereof shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof. This
Settlement Agreement may be amended only by a written agreement executed by each
of the Parties hereto.
4.8 The Parties hereto, and each of them, represent and declare that in
executing this Settlement Agreement, they rely solely upon their own judgement,
belief and knowledge, and on the advice and recommendations of their own
independently selected counsel, concerning the nature, extent and duration of
their rights and claims and that they have not been influenced to any extent
whatsoever in executing the same by any representations or statements covering
any matters made by any of the Parties hereto or by any person representing them
or any of them. The Parties acknowledge that no Party hereto nor any of their
representatives have made any promise, representation or warranty whatsoever,
written or oral, as any inducement to enter into this Settlement Agreement,
except as expressly set forth in this Settlement Agreement.
4.9 The Parties hereto or responsible officer or representative thereof,
and each of them, further represent and warrant that they have carefully read
this Settlement Agreement and know and understand the contents thereof, and that
they signed this Settlement Agreement freely and voluntarily. Each of the
representatives executing this Settlement Agreement on behalf of their
respective corporations or partnerships is empowered to do so and thereby binds
his respective corporation or partnership.
4.10 No party (nor any officer, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any
other party regarding any fact relied upon in entering into this Settlement
Agreement, and each party does not rely upon any statement, representation or
promise of any other party (or any officer, agent, employee, representative, or
attorney of or for any other party) in executing this Settlement Agreement, or
in making the settlement provided for herein, except as expressly stated int his
Settlement Agreement.
4.11 Each party to this Settlement Agreement has made such investigation of
the facts pertaining to this settlement and this Settlement Agreement and of all
matters pertaining thereto as he or it deems necessary.
4.12 In entering into this Settlement Agreement and the settlement provided
for herein, each party assumes the risk of any misrepresentation, concealment or
mistake. If any party should subsequently discover that any fact relied upon by
him or it in entering into this Settlement Agreement is untrue, or that any fact
was concealed from him or it, or that his/its understanding of the facts or of
the law was incorrect, such party shall not be entitled to any relief in such
connection or otherwise, including, without limiting the generality of the
foregoing, any alleged right or claim to set aside or rescind this Settlement
Agreement. This Settlement Agreement is intended to be and is final and binding
between the Parties hereto with respect to the Released Claims, regardless of
any claims of misrepresentation, promise made without the intention of
performing, concealment of fact, mistake of fact or law, or of any other
circumstance whatsoever.
4.
<PAGE>
4.13 Each of the Parties is aware that he/it my hereafter discover claims
or facts in addition to or different from those he or it now knows or believes
to be true with respect to the Released Claims. Nevertheless, it is the
intention of the parties to fully, finally and forever settle and release the
Released Claims, which do now exist, may exist, or heretofore have existed
between them.
4.14 Each term of this Settlement Agreement is contractual and is not
merely a recital.
4.15 Whenever the context so requires, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
4.16 The subject headings of the sections, paragraphs and subparagraphs of
this Settlement Agreement are included for convenience only, and shall not
affect the construction or interpretation of any of its provisions.
4.17 This Settlement Agreement has been jointly prepared and negotiated by
counsel for each of the Parties, and the Parties agree that this Settlement
Agreement shall be construed as a whole according to its fair meaning and is not
to be strictly construed for or against either of the Parties hereto.
4.18 The Parties acknowledge and agree that they each have been represented
by separate and independent legal counsel and have relied on counsel of their
own choosing at all stages of the negotiation, preparation and drafting of this
Settlement Agreement.
4.19 Each Party further acknowledges that this Settlement Agreement, has
been explained to each by their respective counsel, and that each Party fully
understands the contents and legal effect of said documents. The Parties
further acknowledge and agree that they enter into this Settlement Agreement
free from duress, fraud, undue influence, coercion, or oppression of any kind.
5. NOTICES
5.1 Any written notice, demand, request or communication that any Party
desires or is required to give to or serve on the other Party or any other
person pursuant to the Settlement Agreement shall be in writing and either:
5.1.1 Sent by prepaid first-class mail; or
5.1.2 Sent by prepaid one-day early morning Express Mail, Federal
Express, or similar next day morning delivery service.
5.2 Notices, demands, requests, consents, approvals, or other such written
communications are conclusively deemed received:
5.
<PAGE>
5.2.1 Five (5) business days after they are mailed if service or
delivery is made pursuant to subpart 5.1.1 above; or
5.2.2 Two (2) business days after transmitted if they are served
or delivered pursuant to subpart 5.1.2 above.
5.3 The date on which the last addressee is deemed to have received the
notice, demand, request, consent, approval or communications shall be deemed the
date of receipt by the Party to whom it is given to or served.
5.4 Any notice, demand, request, consent, approval, or communication that
either Party desires or is required to give to the other Party is ordered to be
addressed and served on or delivered to the other Party at the addresses set
forth below. Any Party may change his or her address by notifying the other
Parties of their change of address(es).
The address for Cinergi is as follows:
Cinergi Pictures Entertainment Inc. and
Cinergi Productions N.V. Inc.
2308 Broadway
Santa Monica, California 90404
Attn: Erick J. Feitshans, Esq.
Facsimile: (310)828-3861
With a copy to:
Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310)553-7068
The address for Summit is as follows:
Summit Entertainment N.V.
Castorweg 22-24
P.O. Box 155
Curacao, Netherlands Antilles
Attn: Lourdes Girigori-Penzo
With a copy to
6.
<PAGE>
Summit Entertainment L.P.
2308 Broadway
Santa Monica, California 90404
Attn: Andrew Matosich, Esq.
Facsimile: (310)828-4132
With a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
2121 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attn: Scott P. Cooper, Esq.
6. CHOICE OF LAW/ATTORNEY'S FEES
6.1 This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and governed by the
laws of the State of California. Subsequent changes in California law and
federal law through legislation or judicial interpretation that creates or finds
additional or different rights and obligations of the Parties shall not affect
this Settlement Agreement.
6.2 This Settlement Agreement and its validity, construction and effect
shall be governed by the laws of the State of California applicable to contracts
wholly to be performed therein. In the event one of the Parties hereto
institutes any proceeding in connection with or concerning the interpretation or
enforcement of this Settlement Agreement, the prevailing Party shall be entitled
to recover all reasonable outside attorney's fees, costs and expenses actually
incurred in connection with such proceedings.
7. SEVERABILITY
7.1 Nothing contained herein shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any of the provisions contained herein and any present or future statue,
law, ordinance or regulation contrary to which the parties have no legal right
to contract, the latter shall prevail, but the provision of this Settlement
Agreement which is affected shall be curtailed and limited to the extent
necessary to bring it within the requirements of the law. All of the provisions
of this Settlement Agreement are intended to be distinct and severable.
8. EXECUTION
8.1 This Settlement Agreement may be executed in counterparts and when
each Party has signed and delivered at least one such counterpart to each of the
other Parties, each counterpart shall be deemed an original, and all
counterparts taken together shall constitute one and the same
7.
<PAGE>
agreement, which shall be binding and effective as to all Parties. This
Settlement Agreement may be executed via facsimile signatures, which shall
have the same force and effect as if they were original signatures.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its or his name, respectively and each
warrants they have the authority to sign in their representative capacity.
CINERGI PICTURES
ENTERTAINMENT INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
------------------------------------
Its: Vice President
------------------------------------
CINERGI PRODUCTIONS N.V. INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
------------------------------------
Its: Vice President
------------------------------------
SUMMIT ENTERTAINMENT N.V.
Dated: September 10, 1997 By: /s/ Lourdes Girigori-Penzo
------------------------------------
Its: Managing Director
------------------------------------
SUMMIT ENTERTAINMENT L.P.
Dated: September 10, 1997 By: /s/ Andrew J. Matosich
------------------------------------
Its: Vice President
------------------------------------
8.
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual General Release is made as of the 10th
day of September, 1997, by and among Cinergi Pictures Entertainment Inc., a
corporation organized and existing under the laws of Delaware, and Cinergi
Productions N.V. Inc., a corporation organized and operating under the laws of
Delaware, and all of their respective affiliates (collectively "Cinergi"), on
the one hand, and Summit Entertainment N.V., a corporation organized and
existing under the laws of the Netherland Antilles ("Summit"), on the other,
relating to that certain dispute between Film Office and Cinergi concerning the
motion picture "Shadow Conspiracy" (the "Picture").
RECITALS
A. Cinergi and Summit previously made and entered into that certain Sales
Agency Agreement dated as of 1 December 1993 and amended from time-to-time
("Agreement") relating to various motion pictures Cinergi produces for worldwide
exploitation which Summit provided foreign sales agency services to Cinergi.
B. Cinergi Productions N.V. Inc., Summit Entertainment L.P., and Chemical
Bank were named defendants in a civil action before the Superior Court of the
State of California for the County of Los Angeles (case number BC 156333), filed
on or about August 28, 1996, by Film Office, a French Societe (the "State
Action").
C. Cinergi Productions N.V. Inc. and Summit Entertainment L.P. were named
defendants in a special proceeding before the honorable M. Gauthier, President,
Tribunal de Commerce de Paris (the "French Action"), which resulted in an order
dated September 25, 1996, enjoining Cinergi Productions, N.V. Inc., Summit
Entertainment L.P., Inc. and ABN-AMRO Bank from negotiating a certain letter of
credit.
D. Cinergi Productions N.V. Inc. was the claimant in an arbitral
proceeding against Film Office filed on or about October 22, 1996 with the
American Film Marketing Association (the "Arbitration").
E. Chase Manhattan Bank (formerly known as Chemical Bank) was the
petitioner and appellant in an appeal of a ruling in the State Action, which was
filed before the Court of Appeal of the State of California, Second Appellate
District, Division 7 (case number B105694) (the "Appeal").
F. Cinergi and Summit wish to settle any disputes or claims arising out
of or related to the State Action, the French Action, the Appeal, and the
Arbitration and the subject matter thereof (collecting the "Actions") as of the
date of this Settlement Agreement.
G. Cinergi and Summit Entertainment L.P. have entered into a settlement
agreement dated as of the 1st day of July, 1997, relating to the Actions (the
"L.P. Settlement").
1.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
below, the Parties desire to, and hereby do, resolve their differences and agree
as follows:
1. RELEASE
1.1 RELEASED CLAIMS.
1.1.1 Summit hereby releases and forever discharges Cinergi,
and all of Cinergi's agents, predecessors, successors, attorneys, shareholders,
officers, directors and all other representatives of any or all of them, from
any and all claims, demands, actions, causes of action, controversies, losses
and damages, suspected or unsuspected, whether known or not known, that exist as
of the date of execution of this Settlement Agreement, relating to the subject
matters of the Actions.
1.1.2 In consideration for, and upon performance of, the L.P.
Settlement, Cinergi hereby releases and forever discharges Summit, and all of
Summit's agents, predecessors, successors, attorneys, shareholders, officers,
directors and all other representatives of any or all of them, from any and all
claims, demands, actions, causes of action, controversies, losses and damages,
suspected or unsuspected, whether known or not known, that exist as of the date
of execution of this Settlement Agreement, relating to the subject matters of
the Actions.
1.2 With respect to the Released Claims, all rights under California
Civil Code Section 1542, are hereby expressly waived by the Parties, and each of
them notwithstanding any provision to the contrary. Section 1542 provides as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the Release, which if known by
him must have materially affected his settlement with
the debtor."
The Parties, and each of them, and their representatives, heirs and assigns
expressly waive and release any right or benefit which they have or may have
under Section 1542 of the Civil Code of the State of California, to the fullest
extent that they may waive all such rights and benefits pertaining to the
Actions. It is the intention of the Parties, and each of them, through this
Settlement Agreement, and with the advice of counsel, to fully, finally and
forever settle and release all such matters, and all claims relative thereto, in
furtherance of such intention.
2. CONFIDENTIALITY
2.1 The Parties hereto, and their officers, directors,
representatives, agents, employees, and attorneys shall not disclose, directly
or indirectly, any of the financial terms of the Settlement agreement, which are
confidential. Notwithstanding the foregoing, the Parties shall be able to
2.
<PAGE>
disclose the terms of the Settlement Agreement as necessary with respect to
their legal and financial affairs. In such instance, the Parties shall inform
any recipients of such information that the financial terms of the settlement
must remain confidential.
3. MISCELLANEOUS PROVISIONS
3.1 In order to carry out the terms and conditions of this Settlement
Agreement, the Parties agree to promptly execute upon reasonable request any and
all documents and instruments necessary to effectuate the terms of this
Settlement Agreement.
3.2 The Parties agree and acknowledge that this Settlement Agreement
represents a settlement of disputed claims and that, by entering into this
Settlement Agreement no Party admits or acknowledges that they committed any
wrongdoing on their part.
3.3 This Settlement Agreement is the entire agreement between the
Parties with respect to the Released Claims and supersedes all prior and
contemporaneous oral and written agreements and discussions pertaining to the
Released Claims. This Settlement agreement may be amended only by an agreement
in writing.
3.4 This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives,
successors, trustees in bankruptcy, and assigns and each and every entity which
now or ever was a division, parent, successor, predecessor or subsidiary for
each Party and its respective legal successors and assigns.
3.5 The Parties represent and warrant that each of them have not
assigned all or any portion of any claim pertaining to the Released Claims to
any person or entity. In the event any claims are made by any third persons or
entities based upon any purported assignment or any such liens or claims are
asserted in connection with the Released Claims or proceeds of the Settlement
Agreement, then the Party who has breached his representation or warranty
contained herein agrees to indemnify and hold harmless the other Party from any
said claims being made.
3.6 In the event that any covenant, condition or other provision
herein contained is held to be invalid, void or illegal by any Court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Settlement Agreement and shall in no way affect, impair or invalidate any
other covenant, condition or other provision shall be deemed invalid due to its
scope or breadth, such covenant, condition or other provision shall be deemed
valid to the extent of the scope or breadth permitted by law.
3.7 No breach of any provision hereof can be waived unless in
writing. Waiver of any one breach of any provision hereof shall not be deemed
to be a waiver of any other breach of the same or any other provision hereof.
This Settlement Agreement may be amended only by a written agreement executed by
each of the Parties hereto.
3.
<PAGE>
3.8 The Parties hereto, and each of them, represent and declare that
in executing this Settlement Agreement, they rely solely upon their own
judgement, belief and knowledge, and on the advice and recommendations of their
own independently selected counsel, concerning the nature, extent and duration
of their rights and claims and that they have not been influenced to any extent
whatsoever in executing the same by any representations or statements covering
any matters made by any of the Parties hereto or by any person representing them
or any of them. The Parties acknowledge that no Party hereto nor any of their
representatives have made any promise, representation or warranty whatsoever,
written or oral, as any inducement to enter into this Settlement Agreement,
except as expressly set forth in this Settlement Agreement.
3.9 The Parties hereto or responsible officer or representative
thereof, and each of them, further represent and warrant that they have
carefully read this Settlement Agreement and know and understand the contents
thereof, and that they signed this Settlement Agreement freely and voluntarily.
Each of the representatives executing this Settlement Agreement on behalf of
their respective corporations or partnerships is empowered to do so and thereby
binds his respective corporation or partnership.
3.10 No party (nor any officer, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any
other party regarding any fact relied upon in entering into this Settlement
Agreement, and each party does not rely upon any statement, representation or
promise of any other party (or any officer, agent, employee, representative, or
attorney of or for any other party) in executing this Settlement Agreement, or
in making the settlement provided for herein, except as expressly stated int his
Settlement Agreement.
3.11 Each party to this Settlement Agreement has made such
investigation of the facts pertaining to this settlement and this Settlement
Agreement and of all matters pertaining thereto as he or it deems necessary.
3.12 In entering into this Settlement Agreement and the settlement
provided for herein, each party assumes the risk of any misrepresentation,
concealment or mistake. If any party should subsequently discover that any fact
relied upon by him or it in entering into this Settlement Agreement is untrue,
or that any fact was concealed from him or it, or that his/its understanding of
the facts or of the law was incorrect, such party shall not be entitled to any
relief in such connection or otherwise, including, without limiting the
generality of the foregoing, any alleged right or claim to set aside or rescind
this Settlement Agreement. This Settlement Agreement is intended to be and is
final and binding between the Parties hereto with respect to the Released
Claims, regardless of any claims of misrepresentation, promise made without the
intention of performing, concealment of fact, mistake of fact or law, or of any
other circumstance whatsoever.
3.13 Each of the Parties is aware that he/it my hereafter discover
claims or facts in addition to or different from those he or it now knows or
believes to be true with respect to the Released Claims. Nevertheless, it is
the intention of the parties to fully, finally and forever settle and release
the Released Claims, which do now exist, may exist, or heretofore have existed
between them.
4.
<PAGE>
3.14 Each term of this Settlement Agreement is contractual and is not
merely a recital.
3.15 Whenever the context so requires, the masculine gender includes
the feminine and/or neuter, and the singular number includes the plural.
3.16 The subject headings of the sections, paragraphs and
subparagraphs of this Settlement Agreement are included for convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
3.17 This Settlement Agreement has been jointly prepared and
negotiated by counsel for each of the Parties, and the Parties agree that this
Settlement Agreement shall be construed as a whole according to its fair meaning
and is not to be strictly construed for or against either of the Parties hereto.
3.18 The Parties acknowledge and agree that they each have been
represented by separate and independent legal counsel and have relied on counsel
of their own choosing at all stages of the negotiation, preparation and drafting
of this Settlement Agreement.
3.19 Each Party further acknowledges that this Settlement Agreement,
has been explained to each by their respective counsel, and that each Party
fully understands the contents and legal effect of said documents. The Parties
further acknowledge and agree that they enter into this Settlement Agreement
free from duress, fraud, undue influence, coercion, or oppression of any kind.
4. NOTICES
4.1 Any written notice, demand, request or communication that any
Party desires or is required to give to or serve on the other Party or any other
person pursuant to the Settlement Agreement shall be in writing and either:
4.1.1 Sent by prepaid first-class mail; or
4.1.2 Sent by prepaid one-day early morning Express Mail,
Federal Express, or similar next day morning delivery service.
4.2 Notices, demands, requests, consents, approvals, or other such
written communications are conclusively deemed received:
4.2.1 Five (5) business days after they are mailed if service
or delivery is made pursuant to subpart 4.1.1 above; or
4.2.2 Two (2) business days after transmitted if they are
served or delivered pursuant to subpart 4.1.2 above.
5.
<PAGE>
4.3 The date on which the last addressee is deemed to have received
the notice, demand, request, consent, approval or communications shall be deemed
the date of receipt by the Party to whom it is given to or served.
4.4 Any notice, demand, request, consent, approval, or communication
that either Party desires or is required to give to the other Party is ordered
to be addressed and served on or delivered to the other Party at the addresses
set forth below. Any Party may change his or her address by notifying the other
Parties of their change of address(es).
The address for Cinergi is as follows:
Cinergi Pictures Entertainment Inc. and
Cinergi Productions N.V. Inc.
2308 Broadway
Santa Monica, California 90404
Attn: Erick J. Feitshans, Esq.
Facsimile: (310) 828-3861
With a copy to:
Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310) 553-7068
The address for Summit is as follows:
Summit Entertainment N.V.
Castorweg 22-24
P.O. Box 155
Curacao, Netherlands Antilles
Attn: Lourdes Girigori-Penzo
With copies to
Summit Entertainment L.P.
2308 Broadway
Santa Monica, California 90404
Attn: Andrew Matosich, Esq.
Facsimile: (310)828-4132
6.
<PAGE>
and to:
Proskauer Rose Goetz & Mendelsohn LLP
2121 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attn: Scott P. Cooper, Esq.
5. CHOICE OF LAW/ATTORNEY'S FEES
5.1 This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and governed by the
laws of the State of California. Subsequent changes in California law and
federal law through legislation or judicial interpretation that creates or finds
additional or different rights and obligations of the Parties shall not affect
this Settlement Agreement.
5.2 This Settlement Agreement and its validity, construction and
effect shall be governed by the laws of the State of California applicable to
contracts wholly to be performed therein. In the event one of the Parties
hereto institutes any proceeding in connection with or concerning the
interpretation or enforcement of this Settlement Agreement, the prevailing Party
shall be entitled to recover all reasonable outside attorney's fees, costs and
expenses actually incurred in connection with such proceedings.
6. SEVERABILITY
6.1 Nothing contained herein shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any of the provisions contained herein and any present or future statue,
law, ordinance or regulation contrary to which the parties have no legal right
to contract, the latter shall prevail, but the provision of this Settlement
Agreement which is affected shall be curtailed and limited to the extent
necessary to bring it within the requirements of the law. All of the provisions
of this Settlement Agreement are intended to be distinct and severable.
7. EXECUTION
7.1 This Settlement Agreement may be executed in counterparts and
when each Party has signed and delivered at least one such counterpart to each
of the other Parties, each counterpart shall be deemed an original, and all
counterparts taken together shall constitute one and the same
7.
<PAGE>
agreement, which shall be binding and effective as to all Parties. This
Settlement Agreement may be executed via facsimile signatures, which shall have
the same force and effect as if they were original signatures.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its or his name, respectively and each
warrants they have the authority to sign in their representative capacity.
CINERGI PICTURES
ENTERTAINMENT INC.
Dated: September 10, 1997 By:
/s/ Erick J. Feitshans
--------------------------
Its: Vice President
--------------------------
CINERGI PRODUCTIONS N.V. INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
--------------------------
Its: Vice President
--------------------------
SUMMIT ENTERTAINMENT N.V.
Dated: September 10, 1997 By: /s/ Lourdes Girigori-Penzo
--------------------------
Its: Managing Director
--------------------------
8.
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual General Release is made as of the 10th
day of September 1997, by and among Cinergi Pictures Entertainment Inc., a
corporation organized and existing under the laws of Delaware, and Cinergi
Productions N.V. Inc., a corporation organized and operating under the laws of
Delaware, and all of their respective affiliates (collectively "Cinergi"), on
the one hand, and Summit Entertainment L.P., a California Limited Partnership
("Summit"), on the other, relating to that certain dispute between Film Office
and Cinergi concerning the motion picture "Shadow Conspiracy" (the "Picture").
RECITALS
A. Cinergi and Summit previously made and entered into that certain Sales
Agency Agreement dated as of 1 December 1993 and amended from time-to-time
("Agreement") relating to various motion pictures Cinergi produces for worldwide
exploitation which Summit provided foreign sales agency services to Cinergi.
B. Cinergi Productions N.V. Inc., Summit Entertainment L.P., and Chemical
Bank were named defendants in a civil action before the Superior Court of the
State of California for the County of Los Angeles (case number BC 156333), filed
on or about August 28, 1996, by Film Office, a French Societe (the "State
Action").
C. Cinergi Productions N.V. Inc. and Summit Entertainment L.P. were named
defendants in a special proceeding before the honorable M. Gauthier, President,
Tribunal de Commerce de Paris (the "French Action"), which resulted in an order
dated September 25, 1996, enjoining Cinergi Productions, N.V. Inc., Summit
Entertainment L.P., Inc. and ABN-AMRO Bank from negotiating a certain letter of
credit.
D. Cinergi Productions N.V. Inc. was the claimant in an arbitral
proceeding against Film Office filed on or about October 22, 1996 with the
American Film Marketing Association (the "Arbitration").
E. Chase Manhattan Bank (formerly known as Chemical Bank) was the
petitioner and appellant in an appeal of a ruling in the State Action, which was
filed before the Court of Appeal of the State of California, Second Appellate
District, Division 7 (case number B105694) (the "Appeal").
F. Cinergi and Summit wish to settle any disputes or claims arising out
of or related to the State Action, the French Action, the Appeal, and the
Arbitration and the subject matter thereof (collecting the "Actions") as of the
date of this Settlement Agreement.
1.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
below, the Parties desire to, and hereby do, resolve their differences and agree
as follows:
1. RELEASE
1.1 RELEASED CLAIMS.
1.1.1 Summit hereby releases and forever discharges Cinergi, and
all of Cinergi's agents, predecessors, successors, attorneys, shareholders,
officers, directors and all other representatives of any or all of them, from
any and all claims, demands, actions, causes of action, controversies, losses
and damages, suspected or unsuspected, whether known or not known, that exist as
of the date of execution of this Settlement Agreement, relating to the subject
matters of the Actions.
1.1.2 Upon its receipt of the sum set forth in paragraph 2 hereof,
Cinergi hereby releases and forever discharges Summit, and all of Summit's
agents, predecessors, successors, attorneys, shareholders, officers, directors
and all other representatives of any or all of them, from any and all claims,
demands, actions, causes of action, controversies, losses and damages, suspected
or unsuspected, whether known or not known, that exist as of the date of
execution of this Settlement Agreement, relating to the subject matters of the
Actions.
1.2 With respect to the Released Claims, all rights under California
Civil Code Section 1542, are hereby expressly waived by the Parties, and each of
them notwithstanding any provision to the contrary. Section 1542 provides as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the Release, which if known by
him must have materially affected his settlement with
the debtor."
The Parties, and each of them, and their representatives, heirs and assigns
expressly waive and release any right or benefit which they have or may have
under Section 1542 of the Civil Code of the State of California, to the fullest
extent that they may waive all such rights and benefits pertaining to the
Actions. It is the intention of the Parties, and each of them, through this
Settlement Agreement, and with the advice of counsel, to fully, finally and
forever settle and release all such matters, and all claims relative thereto, in
furtherance of such intention.
2. SETTLEMENT TERMS
2.1 PAYMENT. Within five (5) business days of the execution of this
Settlement Agreement, Summit shall cause to be paid to Cinergi the sum of four
hundred and twenty five thousand United States dollars (US$425,000).
2.
<PAGE>
3. CONFIDENTIALITY
3.1 The Parties hereto, and their officers, directors, representatives,
agents, employees, and attorneys shall not disclose, directly or indirectly, any
of the financial terms of the Settlement agreement, which are confidential.
Notwithstanding the foregoing, the Parties shall be able to disclose the terms
of the Settlement Agreement as necessary with respect to their legal and
financial affairs. In such instance, the Parties shall inform any recipients of
such information that the financial terms of the settlement must remain
confidential.
4. MISCELLANEOUS PROVISIONS
4.1 In order to carry out the terms and conditions of this Settlement
Agreement, the Parties agree to promptly execute upon reasonable request any and
all documents and instruments necessary to effectuate the terms of this
Settlement Agreement.
4.2 The Parties agree and acknowledge that this Settlement Agreement
represents a settlement of disputed claims and that, by entering into this
Settlement Agreement no Party admits or acknowledges that they committed any
wrongdoing on their part.
4.3 This Settlement Agreement is the entire agreement between the
Parties with respect to the Released Claims and supersedes all prior and
contemporaneous oral and written agreements and discussions pertaining to the
Released Claims. This Settlement agreement may be amended only by an agreement
in writing.
4.4 This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives,
successors, trustees in bankruptcy, and assigns and each and every entity which
now or ever was a division, parent, successor, predecessor or subsidiary for
each Party and its respective legal successors and assigns.
4.5 The Parties represent and warrant that each of them have not
assigned all or any portion of any claim pertaining to the Released Claims to
any person or entity. In the event any claims are made by any third persons or
entities based upon any purported assignment or any such liens or claims are
asserted in connection with the Released Claims or proceeds of the Settlement
Agreement, then the Party who has breached his representation or warranty
contained herein agrees to indemnify and hold harmless the other Party from any
said claims being made.
4.6 In the event that any covenant, condition or other provision herein
contained is held to be invalid, void or illegal by any Court of competent
jurisdiction, the same shall be deemed severable from the remainder of this
Settlement Agreement and shall in no way affect, impair or invalidate any other
covenant, condition or other provision shall be deemed invalid due to its scope
or breadth, such covenant, condition or other provision shall be deemed valid to
the extent of the scope or breadth permitted by law.
3.
<PAGE>
4.7 No breach of any provision hereof can be waived unless in writing.
Waiver of any one breach of any provision hereof shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof. This
Settlement Agreement may be amended only by a written agreement executed by each
of the Parties hereto.
4.8 The Parties hereto, and each of them, represent and declare that in
executing this Settlement Agreement, they rely solely upon their own judgement,
belief and knowledge, and on the advice and recommendations of their own
independently selected counsel, concerning the nature, extent and duration of
their rights and claims and that they have not been influenced to any extent
whatsoever in executing the same by any representations or statements covering
any matters made by any of the Parties hereto or by any person representing them
or any of them. The Parties acknowledge that no Party hereto nor any of their
representatives have made any promise, representation or warranty whatsoever,
written or oral, as any inducement to enter into this Settlement Agreement,
except as expressly set forth in this Settlement Agreement.
4.9 The Parties hereto or responsible officer or representative
thereof, and each of them, further represent and warrant that they have
carefully read this Settlement Agreement and know and understand the contents
thereof, and that they signed this Settlement Agreement freely and voluntarily.
Each of the representatives executing this Settlement Agreement on behalf of
their respective corporations or partnerships is empowered to do so and thereby
binds his respective corporation or partnership.
4.10 No party (nor any officer, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any
other party regarding any fact relied upon in entering into this Settlement
Agreement, and each party does not rely upon any statement, representation or
promise of any other party (or any officer, agent, employee, representative, or
attorney of or for any other party) in executing this Settlement Agreement, or
in making the settlement provided for herein, except as expressly stated int his
Settlement Agreement.
4.11 Each party to this Settlement Agreement has made such investigation
of the facts pertaining to this settlement and this Settlement Agreement and of
all matters pertaining thereto as he or it deems necessary.
4.12 In entering into this Settlement Agreement and the settlement
provided for herein, each party assumes the risk of any misrepresentation,
concealment or mistake. If any party should subsequently discover that any fact
relied upon by him or it in entering into this Settlement Agreement is untrue,
or that any fact was concealed from him or it, or that his/its understanding of
the facts or of the law was incorrect, such party shall not be entitled to any
relief in such connection or otherwise, including, without limiting the
generality of the foregoing, any alleged right or claim to set aside or rescind
this Settlement Agreement. This Settlement Agreement is intended to be and is
final and binding between the Parties hereto with respect to the Released
Claims, regardless of any claims of misrepresentation, promise made without the
intention of performing, concealment of fact, mistake of fact or law, or of any
other circumstance whatsoever.
4.
<PAGE>
4.13 Each of the Parties is aware that he/it my hereafter discover
claims or facts in addition to or different from those he or it now knows or
believes to be true with respect to the Released Claims. Nevertheless, it is
the intention of the parties to fully, finally and forever settle and release
the Released Claims, which do now exist, may exist, or heretofore have existed
between them.
4.14 Each term of this Settlement Agreement is contractual and is not
merely a recital.
4.15 Whenever the context so requires, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
4.16 The subject headings of the sections, paragraphs and subparagraphs
of this Settlement Agreement are included for convenience only, and shall not
affect the construction or interpretation of any of its provisions.
4.17 This Settlement Agreement has been jointly prepared and negotiated
by counsel for each of the Parties, and the Parties agree that this Settlement
Agreement shall be construed as a whole according to its fair meaning and is not
to be strictly construed for or against either of the Parties hereto.
4.18 The Parties acknowledge and agree that they each have been
represented by separate and independent legal counsel and have relied on counsel
of their own choosing at all stages of the negotiation, preparation and drafting
of this Settlement Agreement.
4.19 Each Party further acknowledges that this Settlement Agreement, has
been explained to each by their respective counsel, and that each Party fully
understands the contents and legal effect of said documents. The Parties
further acknowledge and agree that they enter into this Settlement Agreement
free from duress, fraud, undue influence, coercion, or oppression of any kind.
5. NOTICES
5.1 Any written notice, demand, request or communication that any Party
desires or is required to give to or serve on the other Party or any other
person pursuant to the Settlement Agreement shall be in writing and either:
5.1.1 Sent by prepaid first-class mail; or
5.1.2 Sent by prepaid one-day early morning Express Mail, Federal
Express, or similar next day morning delivery service.
5.2 Notices, demands, requests, consents, approvals, or other such
written communications are conclusively deemed received:
5.
<PAGE>
5.2.1 Five (5) business days after they are mailed if service or
delivery is made pursuant to subpart 5.1.1 above; or
5.2.2 Two (2) business days after transmitted if they are served
or delivered pursuant to subpart 5.1.2 above.
5.3 The date on which the last addressee is deemed to have received the
notice, demand, request, consent, approval or communications shall be deemed the
date of receipt by the Party to whom it is given to or served.
5.4 Any notice, demand, request, consent, approval, or communication
that either Party desires or is required to give to the other Party is ordered
to be addressed and served on or delivered to the other Party at the addresses
set forth below. Any Party may change his or her address by notifying the other
Parties of their change of address(es).
The address for Cinergi is as follows:
Cinergi Pictures Entertainment Inc. and
Cinergi Productions N.V. Inc.
2308 Broadway
Santa Monica, California 90404
Attn: Erick J. Feitshans, Esq.
Facsimile: (310) 828-3861
With a copy to:
Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310) 553-7068
The address for Summit is as follows:
Summit Entertainment L.P.
2308 Broadway
Santa Monica, California 90404
Attn: Andrew Matosich, Esq.
Facsimile: (310) 828-4132
With a copy to:
6.
<PAGE>
Proskauer Rose Goetz & Mendelsohn LLP
2121 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attn: Scott P. Cooper, Esq.
6. CHOICE OF LAW/ATTORNEY'S FEES
6.1 This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and governed by the
laws of the State of California. Subsequent changes in California law and
federal law through legislation or judicial interpretation that creates or finds
additional or different rights and obligations of the Parties shall not affect
this Settlement Agreement.
6.2 This Settlement Agreement and its validity, construction and effect
shall be governed by the laws of the State of California applicable to contracts
wholly to be performed therein. In the event one of the Parties hereto
institutes any proceeding in connection with or concerning the interpretation or
enforcement of this Settlement Agreement, the prevailing Party shall be entitled
to recover all reasonable outside attorney's fees, costs and expenses actually
incurred in connection with such proceedings.
7. SEVERABILITY
7.1 Nothing contained herein shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any of the provisions contained herein and any present or future statue,
law, ordinance or regulation contrary to which the parties have no legal right
to contract, the latter shall prevail, but the provision of this Settlement
Agreement which is affected shall be curtailed and limited to the extent
necessary to bring it within the requirements of the law. All of the provisions
of this Settlement Agreement are intended to be distinct and severable.
8. EXECUTION
8.1 This Settlement Agreement may be executed in counterparts and when
each Party has signed and delivered at least one such counterpart to each of the
other Parties, each counterpart shall be deemed an original, and all
counterparts taken together shall constitute one and the same agreement, which
shall be binding and effective as to all Parties. This Settlement Agreement may
be
7.
<PAGE>
executed via facsimile signatures, which shall have the same force and effect as
if they were original signatures.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its or his name, respectively and each
warrants they have the authority to sign in their representative capacity.
CINERGI PICTURES
ENTERTAINMENT INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
-----------------------------------
Its: Vice President
-----------------------------------
CINERGI PRODUCTIONS N.V. INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
-----------------------------------
Its: Vice President
-----------------------------------
SUMMIT ENTERTAINMENT L.P.
Dated: September 10, 1997 By: /s/ Andrew J. Matosich
-----------------------------------
Its: Vice President
-----------------------------------
8.
<PAGE>
SETTLEMENT, MUTUAL RELEASE, AND TERMINATION AGREEMENT
This Settlement Agreement and Mutual General Release is made as of the 10th day
of September, 1997 (the "EFFECTIVE DATE"), by and among Summit Export (UK) Ltd,
a corporation organized and exisiting under the laws of the the United Kingdom
("SUK"), on the one hand, and Cinergi Productions, Kft., a corporation organized
and existing under the laws of Hungary ("KFT"), on the other, relating to the
rights to receive certain payments due pursuant to the terms of various motion
picture lease agreements.
RECITALS
A. Prior to the Effective Date, KFT and SUK previously made and entered
into various film lease agreements, which were amended from time-to-time
relating to various motion pictures SUK leased from various producers (the
"LEASE AGREEMENTS"). Pursuant to the Lease Agreements, KFT was entitled to
receive payment of one percent (1%) of the amount of gross receipts received
pursuant to all sublicenses effected by KFT.
B. To date, SUK has not paid KFT, and KFT has not received, any funds due
pursuant to the Lease Agreements.
C. As of the Effective Date, SUK has entered into that certain settlement
agreement with Cinergi Pictures Entertainment Inc. and Cinergi Productions N.V.
Inc. (collectively "Cinergi") with respect to certain sums owed by Cinergi to
SUK (the "CINERGI/SUK AGREEMENT").
D. SUK and KFT want to settle any disputes or claims which may have
arisen or exist between them arising from the Lease Agreements as of the
Effective Date..
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
below, the Parties desire to, and hereby do, resolve their differences and agree
as follows:
1. RELEASE
1.1 RELEASED CLAIMS.
1.1.1 In consideration for, and upon receipt by KFT of a signed
copy of the Cinergi/SUK Agreeement, KFT hereby releases and forever discharges
SUK, and all of SUK's agents, predecessors, successors, attorneys, shareholders,
officers, directors and all other representatives of any or all of them, from
any and all claims, demands, actions, causes of action, controversies, losses
and damages, suspected or unsuspected, whether known or not known, that exist as
of the date of execution of this Settlement Agreement, relating to the subject
matters of the Lease Agreements, including without limitation any claim which
KFT now has or claims to have or at any time heretofore had, or which at any
time hereafter may have or claim to have against SUK relating to or SUK's
performance arising out of or related to the Lease Agreements ("KFT'S CLAIMS").
1
<PAGE>
1.1.2 SUK hereby releases and forever discharges KFT, and all of
KFT's agents, predecessors, successors, attorneys, shareholders, officers,
directors and all other representatives of any or all of them, from any and all
claims, demands, actions, causes of action, controversies, losses and damages,
suspected or unsuspected, whether known or not known, that exist as of the date
of execution of this Settlement Agreement, relating to the subject matters of
the Lease Agreements, including without limitation any claim which SUK now has
or claims to have or at any time heretofore had, or which at any time hereafter
may have or claim to have against KFT relating to or concerning KFT's
performance arising out of or related to the Lease Agreements, including the
Lease Agreements ("SUK'S CLAIMS"). (KFT's Claims and SUK's Claims are
subsequently referred to as the "RELEASED CLAIMS".)
2. CONFIDENTIALITY
2.1 The Parties hereto, and their officers, directors, representatives,
agents, employees, and attorneys shall not disclose, directly or indirectly, any
of the financial terms of the Settlement Agreement, which are confidential.
Notwithstanding the foregoing, the Parties shall be able to disclose the terms
of the Settlement Agreement as necessary with respect to their legal and
financial affairs. In such instance, the Parties shall inform any recipients of
such information that the financial terms of the settlement must remain
confidential.
3. MISCELLANEOUS PROVISIONS
3.1 In order to carry out the terms and conditions of this Settlement
Agreement, the Parties agree to promptly execute upon reasonable request any and
all documents and instruments necessary to effectuate the terms of this
Settlement Agreement.
3.2 The Parties agree and acknowledge that this Settlement Agreement
represents a settlement of disputed claims and that, by entering into this
Settlement Agreement no Party admits or acknowledges that they committed any
wrongdoing on their part.
3.3 This Settlement Agreement is the entire agreement between the
Parties with respect to the Released Claims and supersedes all prior and
contemporaneous oral and written agreements and discussions pertaining to the
Released Claims. This Settlement agreement may be amended only by an agreement
in writing.
3.4 This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives,
successors, trustees in bankruptcy, and assigns and each and every entity which
now or ever was a division, parent, successor, predecessor or subsidiary for
each Party and its respective legal successors and assigns.
3.5 The Parties represent and warrant that each of them have not
assigned all or any portion of any claim pertaining to the Released Claims to
any person or entity. In the event any claims are made by any third persons or
entities based upon any purported assignment or any such liens or claims are
asserted in connection with the Released Claims or proceeds of the Settlement
Agreement, then
2
<PAGE>
the Party who has breached his representation or warranty contained herein
agrees to indemnify and hold harmless the other Party from any said claims being
made.
3.6 In the event that any covenant, condition or other provision herein
contained is held to be invalid, void or illegal by any Court of competent
jurisdiction, the same shall be deemed severable from the remainder of this
Settlement Agreement and shall in no way affect, impair or invalidate any other
covenant, condition or other provision shall be deemed invalid due to its scope
or breadth, such covenant, condition or other provision shall be deemed valid to
the extent of the scope or breadth permitted by law.
3.7 No breach of any provision hereof can be waived unless in writing.
Waiver of any one breach of any provision hereof shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof.
3.8 The Parties hereto, and each of them, represent and declare that in
executing this Settlement Agreement, they rely solely upon their own judgement,
belief and knowledge, and on the advice and recommendations of their own
independently selected counsel, concerning the nature, extent and duration of
their rights and claims and that they have not been influenced to any extent
whatsoever in executing the same by any representations or statements covering
any matters made by any of the Parties hereto or by any person representing them
or any of them. The Parties acknowledge that no Party hereto nor any of their
representatives have made any promise, representation or warranty whatsoever,
written or oral, as any inducement to enter into this Settlement Agreement,
except as expressly set forth in this Settlement Agreement.
3.9 The Parties hereto or responsible officer or representative
thereof, and each of them, further represent and warrant that they have
carefully read this Settlement Agreement and know and understand the contents
thereof, and that they signed this Settlement Agreement freely and voluntarily.
Each of the representatives executing this Settlement Agreement on behalf of
their respective corporations or partnerships is empowered to do so and thereby
binds his respective corporation or partnership.
3.10 No party (nor any officer, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any
other party regarding any fact relied upon in entering into this Settlement
Agreement, and each party does not rely upon any statement, representation or
promise of any other party (or any officer, agent, employee, representative, or
attorney of or for any other party) in executing this Settlement Agreement, or
in making the settlement provided for herein, except as expressly stated int his
Settlement Agreement.
3.11 Each party to this Settlement Agreement has made such investigation
of the facts pertaining to this settlement and this Settlement Agreement and of
all matters pertaining thereto as he or it deems necessary.
3.12 In entering into this Settlement Agreement and the settlement
provided for herein, each party assumes the risk of any misrepresentation,
concealment or mistake. If any party should subsequently discover that any fact
relied upon by him or it in entering into this Settlement Agreement
3
<PAGE>
is untrue, or that any fact was concealed from him or it, or that his/its
understanding of the facts or of the law was incorrect, such party shall not be
entitled to any relief in such connection or otherwise, including, without
limiting the generality of the foregoing, any alleged right or claim to set
aside or rescind this Settlement Agreement. This Settlement Agreement is
intended to be and is final and binding between the Parties hereto with respect
to the Released Claims, regardless of any claims of misrepresentation, promise
made without the intention of performing, concealment of fact, mistake of fact
or law, or of any other circumstance whatsoever.
3.13 Each of the Parties is aware that he/it my hereafter discover
claims or facts in addition to or different from those he or it now knows or
believes to be true with respect to the Released Claims. Nevertheless, it is
the intention of the parties to fully, finally and forever settle and release
the Released Claims, which do now exist, may exist, or heretofore have existed
between them.
3.14 Each term of this Settlement Agreement is contractual and is not
merely a recital, although the recitals hereto shall be deemed preclusive as to
the facts recited therein.
3.15 Whenever the context so requires, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
3.16 The subject headings of the sections, paragraphs and subparagraphs
of this Settlement Agreement are included for convenience only, and shall not
affect the construction or interpretation of any of its provisions.
3.17 This Settlement Agreement has been jointly prepared and negotiated
by counsel for each of the Parties, and the Parties agree that this Settlement
Agreement shall be construed as a whole according to its fair meaning and is not
to be strictly construed for or against either of the Parties hereto.
3.18 The Parties acknowledge and agree that they each have been
represented by separate and independent legal counsel and have relied on counsel
of their own choosing at all stages of the negotiation, preparation and drafting
of this Settlement Agreement.
3.19 Each Party further acknowledges that this Settlement Agreement, has
been explained to each by their respective counsel, and that each Party fully
understands the contents and legal effect of said documents. The Parties
further acknowledge and agree that they enter into this Settlement Agreement
free from duress, fraud, undue influence, coercion, or oppression of any kind.
4. NOTICES
4.1 Any written notice, demand, request or communication that any Party
desires or is required to give to or serve on the other Party or any other
person pursuant to the Settlement Agreement shall be in writing and either:
4.1.1 Sent by prepaid first-class mail; or
4
<PAGE>
4.1.2 Sent by prepaid one-day early morning Express Mail, Federal
Express, or similar next day morning delivery service.
4.2 Notices, demands, requests, consents, approvals, or other such
written communications are conclusively deemed received:
4.2.1 Five (5) business days after they are mailed if service or
delivery is made pursuant to subpart 4.1.1 above; or
4.2.2 Two (2) business days after transmitted if they are served
or delivered pursuant to subpart 4.1.2 above.
4.3 The date on which the last addressee is deemed to have received the
notice, demand, request, consent, approval or communications shall be deemed the
date of receipt by the Party to whom it is given to or served.
4.4 Any notice, demand, request, consent, approval, or communication
that either Party desires or is required to give to the other Party is ordered
to be addressed and served on or delivered to the other Party at the addresses
set forth below. Any Party may change his or her address by notifying the other
Parties of their change of address(es).
The address for SUK is as follows:
Summit Export (UK) Ltd.
in care of: Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310) 553-7068
The address for KFT is as follows:
Cinergi Productions Kft.
Bacskai u. 28-36
1145 Budapest
HUNGARY
Facsimile: (361) 209.0930
5. CHOICE OF LAW/ATTORNEY'S FEES
5.1 This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and governed by the
laws of England, excluding England's choice of law provisions. Subsequent
changes in English law through legislation or judicial interpretation
5
<PAGE>
that creates or finds additional or different rights and obligations of the
Parties shall not affect this Settlement Agreement.
5.2 In the event one of the Parties hereto institutes any proceeding in
connection with or concerning the interpretation or enforcement of this
Settlement Agreement, the prevailing Party shall be entitled to recover all
reasonable outside attorney's fees, costs and expenses actually incurred in
connection with such proceedings.
6. SEVERABILITY
6.1 Nothing contained herein shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any of the provisions contained herein and any present or future statue,
law, ordinance or regulation contrary to which the parties have no legal right
to contract, the latter shall prevail, but the provision of this Settlement
Agreement which is affected shall be curtailed and limited to the extent
necessary to bring it within the requirements of the law. All of the provisions
of this Settlement Agreement are intended to be distinct and severable.
7. EXECUTION
7.1 This Settlement Agreement may be executed in counterparts and when
each Party has signed and delivered at least one such counterpart to each of the
other Parties, each counterpart shall be deemed an original, and all
counterparts taken together shall constitute one and the same agreement
6
<PAGE>
which shall be binding and effective as to all Parties. This Settlement
Agreement may be executed via facsimile signatures, which shall have the same
force and effect as if they were original signatures.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its or his name, respectively and each
warrants they have the authority to sign in their representative capacity.
SUMMIT EXPORT (UK) LTD.
Dated: September 10, 1997 By: /s/ David Garrett
-----------------------------------
Its: Managing Director
-----------------------------------
CINERGI PRODUCTIONS KFT.
Dated: September 10, 1997 By: /s/ Anna Bodrogi
-----------------------------------
Its: Managing Director
-----------------------------------
7
<PAGE>
SETTLEMENT, MUTUAL RELEASE, AND TERMINATION AGREEMENT
This Settlement Agreement and Mutual General Release is made as of the 10th day
of September, 1997 (the "EFFECTIVE DATE"), by and among Cinergi Pictures
Entertainment Inc., a corporation orgranized and existing under the laws of
Delaware ("CPEI"), and Cinergi Productions N.V. Inc., a corporation organized
and operating under the laws of Delaware ("CPNVI"), and all of their respective
affiliates (collectively "CINERGI") , on the one hand, and Summit Export (UK)
Ltd., a corporation organized and exisiting under the laws of the the United
Kingdom ("SUK"), on the other, relating to the various lease agreements between
SUK and Cinergi for certain motion pictures.
RECITALS
A. Prior to the Effective Date, Cinergi and SUK previously made and
entered into various film lease agreements, which were amended from time-to-time
relating to various motion pictures Cinergi produces for worldwide exploitation
(the "Lease Agreements"). Pursuant to the Lease Agreements, SUK was entitled to
receive payment of one percent (1%) of the amount of gross receipts received
pursuant to all sublicenses effected by SUK.
B. To date, Cinergi has not paid SUK, and SUK has not received, any funds
due pursuant to the Lease Agreements.
B. Cinergi has decided to wind up its production and worldwide
exploitation of theatrical motion pictures ("WINDUP"). On or about April 2,
1997, entered into an agreement in principle with Walt Disney Pictures and
Television ("DISNEY") to acquire virtually all of Cinergi's library of motion
pictures (the "DISNEY AGREEMENT"). On or about July 14, 1997 Cinergi entered
into an agreement with Twentieth Century Fox Film Corporation ("FOX")
(subsequently referred to as the "FOX AGREEMENT") in which, subject to the terms
thereof, Cinergi essentially assigned to Fox all of Cinergi's right, title, and
interest in the motion picture "Die Hard with a Vengeance".
C. Cinergi and SUK now desire to settle any disputes or claims which may
have arisen or exist between them arising from the Lease Agreements as of the
Effective Date.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
below, the Parties desire to, and hereby do, resolve their differences and agree
as follows:
1. RELEASE
1.1 RELEASED CLAIMS.
1.1.1 Upon its receipt of the sums set forth in paragraph 2
hereof, SUK hereby releases and forever discharges Cinergi, and all of Cinergi's
agents, predecessors, successors, attorneys, shareholders, officers, directors
and all other representatives of any or all of them, from any and all claims,
demands, actions, causes of action, controversies, losses and damages, suspected
or unsuspected, whether known or not known, that exist as of the date of
execution of this Settlement Agreement, relating to the subject matters of the
Lease Agreements, including without limitation any
1
<PAGE>
claim which SUK now has or claims to have or at any time heretofore had, or
which at any time hereafter may have or claim to have against Cinergi
relating to or Cinergi's performance arising out of or related to the Lease
Agreements ("SUK'S CLAIMS").
1.1.2 Cinergi hereby releases and forever discharges SUK, and all
of SUK's agents, predecessors, successors, attorneys, shareholders, officers,
directors and all other representatives of any or all of them, from any and all
claims, demands, actions, causes of action, controversies, losses and damages,
suspected or unsuspected, whether known or not known, that exist as of the date
of execution of this Settlement Agreement, relating to the subject matters of
the Lease Agreements, including without limitation any claim which Cinergi now
has or claims to have or at any time heretofore had, or which at any time
hereafter may have or claim to have against SUK relating to or concerning SUK's
performance arising out of or related to the Lease Agreements, including the
Lease Agreements ("CINERGI'S CLAIMS"). (SUK's Claims and Cinergi's Claims are
subsequently referred to as the "RELEASED CLAIMS".)
1.2 With respect to the Released Claims, all rights under California Civil
Code Section 1542, are hereby expressly waived by the Parties, and each of them
notwithstanding any provision to the contrary. Section 1542 provides as
follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
The Parties, and each of them, and their representatives, heirs and assigns
expressly waive and release any right or benefit which they have or may have
under Section 1542 of the Civil Code of the State of California, to the fullest
extent that they may waive all such rights and benefits pertaining to the
Released Claims. It is the intention of the Parties, and each of them, through
this Settlement Agreement, and with the advice of counsel, to fully, finally and
forever settle and release all such matters, and all claims relative thereto, in
furtherance of such intention.
2. SETTLEMENT TERMS
2.1 PAYMENT IN LIEU OF LEASE FEES. Within five (5) business days of SUK's
the execution of this Settlement Agreement, Cinergi shall cause to be paid to
SUK the sum of three hundred twenty-six thousand seventy four United States
dollars (US$326,074).
3. CONFIDENTIALITY
3.1 The Parties hereto, and their officers, directors, representatives,
agents, employees, and attorneys shall not disclose, directly or indirectly, any
of the financial terms of the Settlement Agreement, which are confidential.
Notwithstanding the foregoing, the Parties shall be able to disclose the terms
of the Settlement Agreement as necessary with respect to their legal and
financial affairs. In such instance, the Parties shall inform any recipients of
such information that the financial terms of the settlement must remain
confidential.
2
<PAGE>
4. MISCELLANEOUS PROVISIONS
4.1 In order to carry out the terms and conditions of this Settlement
Agreement, the Parties agree to promptly execute upon reasonable request any and
all documents and instruments necessary to effectuate the terms of this
Settlement Agreement.
4.2 The Parties agree and acknowledge that this Settlement Agreement
represents a settlement of disputed claims and that, by entering into this
Settlement Agreement no Party admits or acknowledges that they committed any
wrongdoing on their part.
4.3 This Settlement Agreement is the entire agreement between the Parties
with respect to the Released Claims and supersedes all prior and contemporaneous
oral and written agreements and discussions pertaining to the Released Claims.
This Settlement agreement may be amended only by an agreement in writing.
4.4 This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives,
successors, trustees in bankruptcy, and assigns and each and every entity which
now or ever was a division, parent, successor, predecessor or subsidiary for
each Party and its respective legal successors and assigns.
4.5 The Parties represent and warrant that each of them have not assigned
all or any portion of any claim pertaining to the Released Claims to any person
or entity. In the event any claims are made by any third persons or entities
based upon any purported assignment or any such liens or claims are asserted in
connection with the Released Claims or proceeds of the Settlement Agreement,
then the Party who has breached his representation or warranty contained herein
agrees to indemnify and hold harmless the other Party from any said claims being
made.
4.6 In the event that any covenant, condition or other provision herein
contained is held to be invalid, void or illegal by any Court of competent
jurisdiction, the same shall be deemed severable from the remainder of this
Settlement Agreement and shall in no way affect, impair or invalidate any other
covenant, condition or other provision shall be deemed invalid due to its scope
or breadth, such covenant, condition or other provision shall be deemed valid to
the extent of the scope or breadth permitted by law.
4.7 No breach of any provision hereof can be waived unless in writing.
Waiver of any one breach of any provision hereof shall not be deemed to be a
waiver of any other breach of the same or any other provision hereof.
4.8 The Parties hereto, and each of them, represent and declare that in
executing this Settlement Agreement, they rely solely upon their own judgement,
belief and knowledge, and on the advice and recommendations of their own
independently selected counsel, concerning the nature, extent and duration of
their rights and claims and that they have not been influenced to any extent
whatsoever in executing the same by any representations or statements covering
any matters made by any of the Parties hereto or by any person representing them
or any of them. The Parties acknowledge that no Party hereto nor any of their
representatives have made any promise, representation or warranty
3
<PAGE>
whatsoever, written or oral, as any inducement to enter into this Settlement
Agreement, except as expressly set forth in this Settlement Agreement.
4.9 The Parties hereto or responsible officer or representative thereof,
and each of them, further represent and warrant that they have carefully read
this Settlement Agreement and know and understand the contents thereof, and that
they signed this Settlement Agreement freely and voluntarily. Each of the
representatives executing this Settlement Agreement on behalf of their
respective corporations or partnerships is empowered to do so and thereby binds
his respective corporation or partnership.
4.10 No party (nor any officer, agent, employee, representative, or
attorney of or for any party) has made any statement or representation to any
other party regarding any fact relied upon in entering into this Settlement
Agreement, and each party does not rely upon any statement, representation or
promise of any other party (or any officer, agent, employee, representative, or
attorney of or for any other party) in executing this Settlement Agreement, or
in making the settlement provided for herein, except as expressly stated int his
Settlement Agreement.
4.11 Each party to this Settlement Agreement has made such investigation of
the facts pertaining to this settlement and this Settlement Agreement and of all
matters pertaining thereto as he or it deems necessary.
4.12 In entering into this Settlement Agreement and the settlement provided
for herein, each party assumes the risk of any misrepresentation, concealment or
mistake. If any party should subsequently discover that any fact relied upon by
him or it in entering into this Settlement Agreement is untrue, or that any fact
was concealed from him or it, or that his/its understanding of the facts or of
the law was incorrect, such party shall not be entitled to any relief in such
connection or otherwise, including, without limiting the generality of the
foregoing, any alleged right or claim to set aside or rescind this Settlement
Agreement. This Settlement Agreement is intended to be and is final and binding
between the Parties hereto with respect to the Released Claims, regardless of
any claims of misrepresentation, promise made without the intention of
performing, concealment of fact, mistake of fact or law, or of any other
circumstance whatsoever.
4.13 Each of the Parties is aware that he/it my hereafter discover claims
or facts in addition to or different from those he or it now knows or believes
to be true with respect to the Released Claims. Nevertheless, it is the
intention of the parties to fully, finally and forever settle and release the
Released Claims, which do now exist, may exist, or heretofore have existed
between them.
4.14 Each term of this Settlement Agreement is contractual and is not
merely a recital, although the recitals hereto shall be deemed preclusive as to
the facts recited therein.
4.15 Whenever the context so requires, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.
4.16 The subject headings of the sections, paragraphs and subparagraphs of
this Settlement Agreement are included for convenience only, and shall not
affect the construction or interpretation of any of its provisions.
4
<PAGE>
4.17 This Settlement Agreement has been jointly prepared and negotiated by
counsel for each of the Parties, and the Parties agree that this Settlement
Agreement shall be construed as a whole according to its fair meaning and is not
to be strictly construed for or against either of the Parties hereto.
4.18 The Parties acknowledge and agree that they each have been represented
by separate and independent legal counsel and have relied on counsel of their
own choosing at all stages of the negotiation, preparation and drafting of this
Settlement Agreement.
4.19 Each Party further acknowledges that this Settlement Agreement, has
been explained to each by their respective counsel, and that each Party fully
understands the contents and legal effect of said documents. The Parties
further acknowledge and agree that they enter into this Settlement Agreement
free from duress, fraud, undue influence, coercion, or oppression of any kind.
5. NOTICES
5.1 Any written notice, demand, request or communication that any Party
desires or is required to give to or serve on the other Party or any other
person pursuant to the Settlement Agreement shall be in writing and either:
5.1.1 Sent by prepaid first-class mail; or
5.1.2 Sent by prepaid one-day early morning Express Mail, Federal
Express, or similar next day morning delivery service.
5.2 Notices, demands, requests, consents, approvals, or other such written
communications are conclusively deemed received:
5.2.1 Five (5) business days after they are mailed if service or
delivery is made pursuant to subpart 5.1.1 above; or
5.2.2 Two (2) business days after transmitted if they are served
or delivered pursuant to subpart 5.1.2 above.
5.3 The date on which the last addressee is deemed to have received the
notice, demand, request, consent, approval or communications shall be deemed the
date of receipt by the Party to whom it is given to or served.
5.4 Any notice, demand, request, consent, approval, or communication that
either Party desires or is required to give to the other Party is ordered to be
addressed and served on or delivered to the other Party at the addresses set
forth below. Any Party may change his or her address by notifying the other
Parties of their change of address(es).
The address for Cinergi is as follows:
5
<PAGE>
Cinergi Pictures Entertainment Inc. and
Cinergi Productions N.V. Inc.
2308 Broadway
Santa Monica, California 90404
Attn: Erick J. Feitshans, Esq.
Facsimile: (310)828-3861
With a copy to:
Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310) 553-7068
The address for SUK is as follows:
Summit Export (UK) Ltd.
in care of:
Ziffren, Brittenham, Branca & Fischer
2121 Avenue of the Stars, 32nd Fl.
Los Angeles, California 90067
Attn: Skip Brittenham, Esq.
Facsimile: (310) 553-7068
6. CHOICE OF LAW/ATTORNEY'S FEES
6.1 This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and governed by the
laws of the State of California, excluding California's choice of law
provisions. Subsequent changes in California law and federal law through
legislation or judicial interpretation that creates or finds additional or
different rights and obligations of the Parties shall not affect this Settlement
Agreement.
6.2 In the event one of the Parties hereto institutes any proceeding in
connection with or concerning the interpretation or enforcement of this
Settlement Agreement, the prevailing Party shall be entitled to recover all
reasonable outside attorney's fees, costs and expenses actually incurred in
connection with such proceedings.
7. SEVERABILITY
7.1 Nothing contained herein shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any of the provisions contained herein and any present or future statue,
law, ordinance or regulation contrary to which the parties have no legal right
to contract, the latter shall prevail, but the provision of this Settlement
Agreement which is
6
<PAGE>
affected shall be curtailed and limited to the extent necessary to bring it
within the requirements of the law. All of the provisions of this Settlement
Agreement are intended to be distinct and severable.
8. EXECUTION
8.1 This Settlement Agreement may be executed in counterparts and when
each Party has signed and delivered at least one such counterpart to each of the
other Parties, each counterpart shall be deemed an original, and all
counterparts taken together shall constitute one and the same agreement
which shall be binding and effective as to all Parties. This Settlement
Agreement may be executed via facsimile signatures, which shall have the same
force and effect as if they were original signatures.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its or his name, respectively and each
warrants they have the authority to sign in their representative capacity.
CINERGI PICTURES
ENTERTAINMENT INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
-------------------------------
Its: Vice President
-------------------------------
CINERGI PRODUCTIONS N.V. INC.
Dated: September 10, 1997 By: /s/ Erick J. Feitshans
-------------------------------
Its: Vice President
-------------------------------
SUMMIT EXPORT (UK) LTD.
Dated: September 10, 1997 By: /s/ David Garrett
-------------------------------
Its: Managing Director
-------------------------------
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MANEX/MASS.ILLUSION BUSINESS ACQUISITION AGREEMENT
THIS BUSINESS ACQUISITION AGREEMENT (the "Agreement") is entered into as
of this 15th day of September 1997 by and between CINERGI PRODUCTIONS INC.
(CALIFORNIA) doing business as MASS.ILLUSION, a California corporation
("Seller"), whose address is 2308 Broadway, Santa Monica, CA 90404 and
MASS.ILLUSIONS, LLC a Massachusetts limited liability company ("Buyer"),
whose principal place of business is 30 Riverview Road, Lenox, MA 01240 and
sets forth the terms and conditions of Buyer's purchase of certain assets and
agreement to perform certain obligations on behalf of Seller with respect to
Seller's motion picture visual effects facility.
WITNESSETH
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell certain of its properties and assets to Buyer as well as Seller desires
to have certain obligations of Seller performed by Buyer, including without
limitation, certain rights, duties and obligations in connection with the
motion picture entitled "What Dreams May Come" (the "Picture");
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase said properties and assets as well as assume certain specified
obligations of Seller for the consideration specified herein; and
WHEREAS, Buyer and Seller are simultaneously executing agreements with
ATL Productions Inc. ("ATL") for the purpose of facilitating this Agreement.
NOW, THEREFORE, in order to consummate the Agreement and in
consideration of the mutual agreements set forth herein, the parties agree as
follows:
SECTION 1. PURCHASE AND SALE OF ASSETS
1.1 SALE AND DESCRIPTION OF ASSETS. Subject to the terms and conditions
specified herein, Seller agrees to sell and Buyer agrees to purchase, at the
Closing (as defined in Section 1.6 hereof), all of the assets set forth on
SCHEDULE A hereto (the "Subject Assets"), "AS IS," and "WITH ALL FAULTS"
without warranty or representation of any kind except as specifically set
forth herein in the form of the quitclaim contained herein as SCHEDULE B, but
specifically excluding any assets in which a party has a security interest
therein (e.g. Sony and ATL) as well as any assets transferred to the Walt
Disney Company relating to the motion picture library sale agreement entered
into with Seller's parent corporation Cinergi Pictures Entertainment Inc.
unless said party has consented to such a transfer in writing. At the
Closing, Seller shall deliver or cause to be delivered to Buyer a Bill of
Sale of the form of SCHEDULE C hereto, releasing to Buyer all of Seller's
title to the Subject Assets subject only to any liens or encumbrances which
are more fully set forth in SCHEDULE D. If Buyer elects to assume the
existing lease of the Lenox Massachusetts Facility (the "Lease"), where
certain of the Subject Assets are located (the "Lenox" Facility), and subject
to the landlord's permission (which Seller warrants that it will use
reasonable efforts to secure said permission), Seller shall cause
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the Lease to be assigned to Buyer and Buyer shall assume the Lease by
executing an Assignment and Assumption of Lease in the form of SCHEDULE E
attached hereto.
1.2 PAYMENT OF PAYROLL. Concurrently upon execution hereof, and
pursuant to the amounts specifically set forth in SCHEDULE F attached
hereto, Buyer will pay all payroll and related obligations listed thereon by
wire transfer or cashier's check. In furtherance thereof and upon execution
of this Agreement, Buyer will cause the sum of TWO HUNDRED FORTY-ONE THOUSAND
FOUR HUNDRED ELEVEN and 79/100 ($241,411.79) to be deposited into the Jeffer,
Mangels, Butler & Marmaro LLP Trust Account ("Trust Account") from which
Seller will cause forthwith all such sums to be disbursed according to the
requirements of SCHEDULE F.
Thereafter and on such dates as listed on SCHEDULE F, Buyer shall
further pay into the Trust Account the sum of TWO HUNDRED AND TWENTY-FOUR
THOUSANDS NINE HUNDRED TWENTY NINE AND 73/100 ($224,929.73) from which Seller
will cause forthwith such sums to be disbursed according to the requirements
of SCHEDULE F plus Buyer will be responsible for and pay all payroll of
Seller's employees/subcontractors encompassed by SCHEDULE F for September 14
and 15, 1997.
1.3 ASSUMPTION OF LIABILITY OF CERTAIN TRADE CREDITORS. On or before
September 23, 1997, Buyer covenants to notify all of Seller's creditors set
forth on SCHEDULE G by way of the letter set forth in SCHEDULE H of Buyer's
agreement to assume the management of Seller's accounts payable in accordance
with paragraph 3.1(c) herein. Seller may also forward such letter to any such
creditor and Seller remains at liberty to compromise any creditor claim on
SCHEDULE G at its own expense.
1.4 Buyer covenants that simultaneous with the execution of this
Agreement, it will cause ALT to enter into a binding agreement with Buyer
which provides that Buyer will assume all of the obligations of Seller in
connection with that certain Short-Form Agreement set forth in paragraph 2.1
hereinbelow.
1.5 CONSIDERATION. In consideration of the transfer by Seller to Buyer
of the Subject Assets, Buyer agrees to perform all of the obligations set
forth in this Agreement, including without limitations, those obligations set
forth in this paragraph 1 and paragraph 3 hereinbelow. For purposes of the
parties, Buyer shall be considered to have purchased the Subject Assets for
the amount of TWO MILLION SIX HUNDRED THOUSAND DOLLAR ($2,600,000) (the
"Purchase Price").
1.6 CLOSING. The closing of this Agreement (herein called the
"Closing") shall be held at the offices of Oberstein, Kibre and Horwitz LLP,
1999 Avenue of the Stars, Suite 1850, Los Angeles, CA 90067 on 15 September
1997 or at such other time or place as may be fixed by mutual agreement of
Buyer and Seller.
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SECTION 2. ASSIGNMENT
2.1 Seller hereby assigns, grants, sells and sets over to Buyer without
any warranties expressed or implied all of its rights, duties, benefits and
obligations (past, present and future) in and to that certain Short-Form
Production Services Agreement dated as of 15 May 1997 ("Short-Form
Agreement") between ATL Productions, Inc. (a subsidiary of Interscope
Communications, Inc.) (collectively "Interscope") and Seller and all elements
thereof relating to the Picture. Buyer does hereby accept such assignment and
indemnifies and holds Seller harmless from any claims, losses, expenses,
damages and costs, including attorneys fees resulting from Buyer's failure to
perform Seller's obligations thereunder. Seller agrees to execute the Short
Form Assignment Agreement attached hereto as SCHEDULE I.
SECTION 3. CONDITIONS
3.1 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation to
consummate this Agreement and the transactions contemplated hereby is
subject, at the option of the Seller, to the fulfillment of the following
conditions whether occurring before or after Closing:
(a) Seller's receipt of a complete release from Interscope in a
form satisfactory to Seller relating to among other things Seller's
obligations to ATL pursuant to the Short-Form Agreement. Additionally, and as
part of Buyer's agreement with ATL, Buyer covenants to secure a covenant from
ATL to Buyer, by which Buyer hereby guarantees to Seller, that ATL will
satisfy all of the financial obligations with respect to the Cineon license
agreement (attached hereto as SCHEDULE J) entered into by Seller relating to
equipment, software and services to be provided on the Picture without
liability to Seller, and Buyer agrees to indemnify and hold Seller harmless
from ATL's inability or refusal to perform those executory obligations
remaining within the Cineon license agreement as they exist at the Closing,
including all expenses, damages, claims, and costs, including attorneys fees.
(b) Buyer's payment of all sums required to be paid pursuant to
paragraphs 1.2 and 1.3 herein; and
(c) As a pool of funds to be used to satisfy Seller's trade
creditors, Buyer shall expend the sum of TWO HUNDRED THOUSAND DOLLARS
($200,000) (the "Creditor Fund") within ninety (90) days of 15 September 1997
(or earlier if Buyer so elects) for the benefit of such trade creditors set
forth on SCHEDULE F subject to the following terms:
(1) The maximum amount any single creditor shall receive from
those funds set forth herein is an amount equal to a proration of those funds
available to pay the creditors divided by the creditors Buyer agrees to
manage less those creditors Buyer will not pay and which Buyer has notified
Seller of in writing. Buyer must indicate to Seller within fifteen (15) days
of Closing which trade creditors (and the respective amounts due such
creditors) Buyer will not pay as part of Buyer's managing of Seller's trade
creditor accounts payable. Prospectively, Buyer may continue to notify Seller
of additional creditors Buyer will not pay hereunder.
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Maximum settlement = Available Funds to Pay Creditors X 100
amount per creditor -----------------------------------------------
(expressed as cents Total Trade Creditors less Creditors Buyer
on the dollar) will not pay
Notwithstanding the foregoing, no payment to any one creditor shall
exceed TWENTY THOUSAND DOLLARS ($20,000) unless Seller agrees to the same in
writing.
(2) No payment to any creditor hereunder shall be made on
account of any open, prospective, or unmatured obligations of Seller up to
and including 15 September 1997 or of any new obligation of Buyer. To the
extent a dispute arises as to the validity of a particular obligation, the
decision of Seller shall conclusively be deemed final.
(3) REPORTING. Buyer shall deliver to Seller every fifteen
days (calculated from 15 September 1997) a report of the current status of
trade creditors paid to date and such report must indicate the creditor paid,
the date paid, the amount paid and all remaining outstanding trade creditors
as of the date of each report submitted to Seller.
(4) RELEASE. Buyer covenants that it will secure an
appropriate release from each creditor paid from the Creditor Fund indicating
Buyer and Seller have made payment in full accord and satisfaction of all
Seller's outstanding credit obligations with respect to said creditor and the
form of said release must be approved by Seller in writing in advance.
(5) Any unspent portion of the Creditor Fund on hand at the
end of the ninety (90) day period must be returned to the Trust Account to be
disbursed pursuant to Seller's instructions for the benefit of creditors.
(6) Buyer shall only be entitled to apply TWENTY-EIGHT
percent (28%) or FIFTY SIX THOUSAND DOLLARS ($56,000) of the Creditor Fund,
to fund trade creditors relating to the Picture.
(7) No part of the Creditor Fund shall be used to pay the
Cineon license agreement which shall be assumed in full by ATL.
SECTION 4. SECURITY INTEREST
Buyer hereby agrees to grant to Seller a first priority security
interest in certain of the Subject Assets in the amount of THREE HUNDRED
SEVENTEEN THOUSAND DOLLARS ($317,000) as a security for Buyer's covenant to
Seller to pay the requisite obligations of Buyer set forth in paragraph 1.2
and 3.1(c) herein as well as to secure Buyer's financial obligation to manage
Seller's trade creditors accounts payable as set forth in paragraph 1.3
herein. Buyer agrees to execute the appropriate UCC-1's (for the states of
California, New York, and Massachusetts) and the Security Agreement set forth
in SCHEDULE K concurrently upon execution of this Agreement and Seller
represents the Collateral (as that term is defined in SCHEDULE K) is not
required equipment relating to the Picture.
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Provided Buyer is not in default hereunder, and upon Buyer's payment of
all sums set forth in SCHEDULE F herein and Buyer's satisfactory performance
of all of its obligations contained in paragraphs 1.3 and 3.1(c) herein as
well as Buyer's return of all unused Creditor Fund amounts to the Trust
Account as set forth in paragraph 3.1(c)(4), Seller covenants to release and
discharge the security interest granted to Seller herein within ten (10) days
of Buyer's performance hereof and Seller agrees to execute the appropriate
documentation to evidence such termination, including without limitation,
UCC-3 financing statements.
SECTION 5. INDEMNITY AND RELEASE
Buyer does hereby agree and at all times indemnify and hold harmless
Seller, its directors, officers, agents, attorneys, parent, subsidiaries and
employees ("Indemnitees") from any claims, losses, expenses, damage and costs
incurred in investigating any claim or defending any suit or action initiated
by any third party, court costs and reasonable attorneys' fees and other
limitation expenses, resulting to Indemnitees, or which Indemnitees, or any
of them, may suffer, incur or sustain or for which any of them become liable
in connection with or resulting from or by reason of any breach by Buyer of
its obligations or covenants to Seller set forth hereunder.
Buyer does hereby release and forever discharge Seller and its
respective successors, predecessors, parents, subsidiaries and affiliated
entities (including without limitation Cinergi Pictures Entertainment Inc.)
together with their respective employees, officers, directors, shareholders,
attorneys, and heirs, from any and all claims, debts, liabilities, demands,
obligations, costs, expenses, actions and causes of action, of every nature,
character and description, suspected or unsuspected, known or unknown,
matured or unmatured, which Buyer and/or Manex Entertainment Ltd. now own or
hold, or have at any time heretofore owned or held, or may at any time own or
hold, by reason of any matter, cause or thing whatsoever occurred, done,
omitted or suffered to be done in connection with, arising out of or relating
directly or indirectly to this Agreement or the Picture or Seller's business
as set forth in this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 Buyer warrants and represents:
(a) Buyer is a duly organized limited liability company of
Massachusetts which is properly constituted and capitalized;
(b) Buyer has the full right, power and authority to enter into
this Agreement;
(c) Buyer has the financial capacity to enter into the transaction
with Interscope and complete all of the obligations set forth therein;
(d) Buyer will enter into the agreement with Interscope set forth
in paragraph 1.4; and,
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(e) Buyer has fully performed its due diligence with respect to the
Subject Assets and accepts the same where is and as is.
6.2 Seller warrants and represents:
(a) Seller has the full right, power and authority to enter into
this Agreement.
SECTION 7. MISCELLANEOUS
7.1 ENTRY UPON PREMISES. Buyer hereby agrees to provide Sony Pictures
Imageworks ("SPI") access to Buyer's premises for purposes of SPI retrieving
all materials SPI is entitled to under the Production Services Agreement
dated 24 February 1997 with respect to the motion picture "Starship Troopers"
and Buyer hereby grants to SPI a license to enter upon the premises for the
purpose set forth herein. Buyer covenants that it (and all of its employees)
will preserve the confidentiality of the Sony settlement agreement and any
breach thereof will be deemed a material breach of this Agreement.
Furthermore, Buyer covenants to make various of its employees available to
Seller (at no cost to Seller) in order for Seller to consummate certain
settlement transactions as more fully set forth in the attached ADDENDUM and
its accompanying SCHEDULE Z-1 attached hereto and incorporated by this
reference.
7.2 RETURN OF MATERIALS/PUBLICITY. All of the motion picture materials
(broadly defined to include, without limitation, all elements, tapes, logos,
digital assets, etc.) in the possession of Buyer must be returned forthwith
to Seller at Seller's cost. Buyer acknowledges and agrees that it may not
exploit any of these assets in any way, manner or form and that any breach of
this paragraph by Buyer will be considered a material breach of this
Agreement. Furthermore, Buyer shall have no right to publicize or utilize the
aforementioned materials in publicity materials to solicit new business to
prospective clients or otherwise.
7.3 ACCESS TO FINANCIAL RECORDS. Buyer covenants to allow Seller
access to the financial records of Mass.Illusion after Buyer's purchase
thereof for purposes of confirming Buyer's progress towards managing all
Seller's accounts payable as more fully set forth in paragraph 1.3 and 3.1(c)
herein. By way of example only, Seller will need access to Buyer's general
ledger to confirm any settlement with a specific trade creditor and Seller
may need to secure a copy of the general ledger of its own purposes.
7.4 FEES AND EXPENSES. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement.
7.5 GOVERNING LAW/JURISDICTION. This Agreement shall be construed under
and governed by the internal laws of the State of California. Both parties
hereto consent to the exclusive jurisdiction of the state and federal courts
within the County of Los Angeles in the State of California.
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7.6 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to
have been given if delivered or sent by facsimile transmission, upon receipt,
or if sent by registered or certified mail, upon the sooner of the date on
which receipt is acknowledged or the expiration of three days after deposit
in United States post office facilities properly addressed with postage
prepaid. All notices to a party will be sent to the following addresses:
SELLER:
Cinergi Productions Inc. (California) Jeffer, Mangels, Butler & Marmaro LLP
dba Mass.Illusion 2121 Avenue of the Stars
2308 Broadway Century City, California 90067
Santa Monica, California Phone: (310) 203-8080
Phone: (310) 315-6000 Fax: (310) 203-0567
Fax: (310) 828-3861 Contact: Joe Eisenberg
Contact: Erick Feitshans
BUYER:
Mass.Illusions, LLC
30 Riverview Road
Lenox, MA 01240
Phone: (413) 637-4500
Fax: (413) 637-0054
Contact: George Q. Vaile
7.4 ENTIRE AGREEMENT. This Agreement, including the Addendum and any
Schedules referred to herein, is complete, reflects the entire agreement of
parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings. Notwithstanding the
foregoing, this Agreement is contingent upon the simultaneous execution of
that certain agreement between Seller and Interscope of even date with
respect to the Short-Form Agreement and the Picture.
7.5 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
7.6 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition set forth herein be waived, except by a writing
duly and validly executed by each party hereto, or in the case of a waiver,
the party waiving compliance.
7.7 AGREEMENT NOT AN OFFER. Under no circumstances shall this Agreement
be deemed to be an offer by Seller to Buyer or Buyer to Seller regarding the
purchase and sale of the Subject Assets, and this Agreement shall only be
binding upon Buyer or Seller if first executed by a duly authorized officer
of Buyer and then counter-executed by an authorized officer of Seller.
7
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
CINERGI PRODUCTIONS INC. (CALIFORNIA) d.b.a. MASS.ILLUSION
By: /s/ ERICK FEITSHANS
-------------------------------------------
Erick Feitshans, Vice President
MASS.ILLUSIONS, LLC
By: /s/ GEORGE Q. VAILE, MGR
-------------------------------------------
George Q. Vaile, Manager
8
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 26,073
<SECURITIES> 0
<RECEIVABLES> 8,216
<ALLOWANCES> 0
<INVENTORY> 53,424
<CURRENT-ASSETS> 87,814
<PP&E> 2,359
<DEPRECIATION> 1,932
<TOTAL-ASSETS> 96,158
<CURRENT-LIABILITIES> 27,584
<BONDS> 0
0
0
<COMMON> 135
<OTHER-SE> 15,786
<TOTAL-LIABILITY-AND-EQUITY> 96,158
<SALES> 59,209
<TOTAL-REVENUES> 60,509
<CGS> 62,198
<TOTAL-COSTS> 78,934
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,362
<INCOME-PRETAX> (22,787)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,787)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,787)
<EPS-PRIMARY> (1.69)
<EPS-DILUTED> (1.69)
</TABLE>
