<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
Cinergi Pictures Entertainment Inc.
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
172470 10 6
- -------------------------------------------------------------------------------
(CUSIP Number)
Ronald L. Blanc, Esq.
Blanc Williams Johnston & Kronstadt, LLP
1900 Avenue of the Stars, 17th floor, Los Angeles, CA 90067
(310) 552-2500
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 11, 1997,
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
CUSIP No. 172470 10 6
<PAGE>
CUSIP No. 172470 10 6 13D
------ -- -
- -------------------------------------------------------------------------------
(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
ANDREW G. VAJNA
- -------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) /X/
- -------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------
(4) Source of Funds*
PF
- -------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
- -------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
U.S.A.
- -------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned 5,863,872
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting Power
0
--------------------------------------------------
(9) Sole Dispositive Power
5,491,531
--------------------------------------------------
(10) Shared Dispositive Power
0
- -------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
5,863,872 (See response to Item 5)
- -------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
/ /
- -------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
43.6%
- -------------------------------------------------------------------------------
(14) Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
<PAGE>
This Amendment No. 2 adds the following information to Items 3, 4, and 7 of
restated Amendment No. 1 to the Schedule 13D (the "Prior Schedule 13D") filed by
Andrew G. Vajna with respect to ownership of the common stock, par value $.01
per share (the "Common Stock"), of Cinergi Pictures Entertainment Inc. (together
with its subsidiaries, the "Company").
ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
As described below, since the filing of the Prior Schedule 13D, Mr. Vajna
has submitted a bid to purchase most of the motion picture development
projects currently owned by the Company. The source of funds for that purchase,
should it occur, could depend on the occurrence of potential future transactions
discussed below but is expected to be either personal funds of Mr. Vajna or
Mr. Vajna's share of corporate funds based on a possible future distribution of
funds to Company shareholders or payment to them in exchange for, or redemption
of, their shares.
ITEM 4 PURPOSE OF THE TRANSACTION
In the Prior Schedule 13D, Mr. Vajna stated that he was engaged in
preliminary discussions with the Company regarding a possible bid on his part
for certain of the assets of the Company that would remain assuming consummation
of the pending sale of substantially all of the films in the Company's motion
picture library and certain other assets to Walt Disney Pictures and Television
(the "Film Library Sale"), including the Company's pending motion picture
development projects and the "Cinergi" name. At about the same time, the
Company stated that it had begun negotiations with an unaffiliated third party
for the sale to such party of a substantial portion of the
<PAGE>
Company's assets, other than those to be sold in the Film Library Sale and other
than the development projects.
Since the Prior Schedule 13D, Mr. Vajna has submitted a written proposal to
the Company's Board of Directors under which Mr. Vajna would agree, subject to
various conditions, to purchase most of the motion picture development
projects currently owned by the Company and cancel his existing employment
agreement with the Company, which has a term ending December 31, 1998. The
purchase price proposed by Mr. Vajna for the development projects was
$4,750,000; however Mr. Vajna proposed that the Company would be free, for a
period of 60 days, to solicit higher bids from third parties subject to a 15%
minimum over-bid requirement and a right on the part of Mr. Vajna to match any
qualified overbid. Under his proposal for termination of the employment
agreement, Mr. Vajna would receive a portion of the amounts otherwise payable to
him through December 31, 1998, and settlement of certain other benefits and
compensation, and he would be free to enter into other employment, including
motion picture production, subject to, among other things, completion of the
Film Library Sale.
Mr. Vajna also proposed a merger between the Company and an acquisition
entity to be owned by him, which would take place after sales of most of the
Company's assets. Under this proposal, all outstanding shares of the Company
owned by persons other than Mr. Vajna would be acquired or redeemed for cash
based on their proportionate share of the net worth of the Company at the time
of the merger, and Mr. Vajna would become the sole owner of the Company with
certain residual assets and liabilities at that time. The merger proposal was
subject to numerous conditions and to negotiation of the specific terms of the
transaction.
On June 11, 1997, the Company's financial advisor, Jefferson Capital Group,
Ltd., responded to Mr. Vajna's written proposal on behalf of a Special Committee
of the Company's Board of Directors. This response indicated provisional
acceptance of Mr. Vajna's proposal to purchase the motion picture development
projects subject to revised over-bid procedures, additional provisions on
reimbursement of the Company for development expenditures, successful
negotiation and execution of a binding agreement of purchase and sale if
Mr. Vajna should be the successful bidder for the projects, and other
conditions. This response also proposed revised terms for termination of
Mr. Vajna's employment agreement. With regard to both the development projects
and Mr. Vajna's merger proposal, this response suggested that the parties
attempt to negotiate and agree upon a definitive merger agreement rather than
continuing to refine
2
<PAGE>
Mr. Vajna's letter of discussion points to the point that it would become a
formal binding offer to the Company.
Mr. Vajna anticipates that any merger agreement will be subject to, among
other things, consummation of the Film Library Sale, the sale to a third party
of all or a significant portion of the Company's other assets (other than the
development projects), and receipt of applicable approvals, including approval
by the Company's stockholders. Mr. Vajna also understands that the Company has
instructed its financial adviser, Jefferson Capital Group, Ltd., to solicit
qualifying cash bids for the Company's development projects from potentially
interested third parties.
The transactions proposed by Mr. Vajna would result in some or all of (i)
the sale of a material amount of assets of the Company, (ii) dispositions of
securities of the Company by the current holders and, possibly, acquisitions of
such securities by the Company or a successor, (iii) an extraordinary corporate
transaction such as a merger, (iv) a change of the present board of directors
and management of the Company and of its capitalization, and (v) the Common
Stock being delisted from the Nasdaq National Market System and becoming
eligible for termination of registration under the Securities Exchange Act of
1934, as amended.
There is no assurance that negotiations regarding the foregoing proposed
transactions will be productive or, if they are successful, that the conditions
to completing the various transactions will be satisfied. The proposals and
response referred to herein are set forth in Exhibits 1 and 2 hereto, which are
incorporated herein by this reference.
ITEM 7 MATERIAL TO BE FILED AS EXHIBITS
The following documents are attached as Exhibits:
1. Letter dated May 30, 1997, from Harry M. (Skip) Brittenham to the
Board of Directors of Cinergi Pictures Entertainment Inc. c/o R.
Timothy O'Donnell, director.
2. Letter dated June 11, 1997, from Jefferson Capital Group, Ltd. to
Harry M. Brittenham, Esq.
3
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 20, 1997
/s/ ANDREW G. VAJNA
---------------------
Andrew G. Vajna
4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
1. Letter dated May 30, 1997, from Harry
M. (Skip) Brittenham to the Board of Directors
of Cinergi Pictures Entertainment Inc.
c/o R. Timothy O'Donnell, director.
2. Letter dated June 11, 1997, from Jefferson
Capital Group, Ltd. to Harry M. Brittenham, Esq.
5
<PAGE>
EXHIBIT 1
[LETTERHEAD]
OUR REFERENCE NUMBER
578
May 30, 1997
The Board of Directors of
Cinergi Pictures Entertainment, Inc.
c/o R. Timothy O'Donnell
Director
Cinergi Pictures Entertainment, Inc.
2308 Broadway
Santa Monica, CA 90404
RE: Proposed Terms for Development Projects/
Employment Agreement/CPEI Merger Offer
Dear Mr. O'Donnell:
The purpose of this letter is to present to the independent members of the
Board of Directors of Cinergi Pictures Entertainment, Inc. ("CPEI") the terms
under which Andrew J. Vajna would agree to (i) purchase the development
projects of CPEI, (ii) cancel his existing employment agreement with CPEI,
and (iii) become the sole shareholder of CPEI in the event that CPEI elects
to redeem the outstanding shares of all other shareholders of CPEI pursuant
to a tender offer.
1. OVERVIEW. In view of the cessation of CPEI's film production activities,
Mr. Vajna makes this offer to purchase all the development projects currently
owned by CPEI and to cancel his existing employment agreement with CPEI.
Also, due to CPEI's present status, the Board of Directors of CPEI may soon
determine that it is in the best interest of its shareholders to redeem and
cash out all of its outstanding shares of stock (other than those held by Mr.
Vajna) pursuant to a merger transaction with an acquisition entity owned by
Mr. Vajna. Mr. Vajna therefore wishes also to offer terms under which he
would be willing, as the result of such merger, to become the sole
shareholder of CPEI and thereby accede to all the unknown and contingent
liabilities and obligations arising after the date of such merger. The
various terms contained in this letter are presented to the independent
members of CPEI's Board of Directors as a non-severable package offer and
thus all such terms must be accepted in order for any terms to be binding.
<PAGE>
Cinergi Pictures Entertainment, Inc.
May 30, 1997
Page 2
2. DEVELOPMENT PROJECTS. Mr. Vajna offers to purchase all rights to all the
development projects currently owned by CPEI for an aggregate purchase price
of $4.75 million. CPEI shall have sixty (60) days from the date it accepts
Mr. Vajna's offer in which to solicit from third parties other offers to
purchase all such development projects. If, during such period, CPEI receives
a third-party offer to purchase all of the development projects for a price
that exceeds $4.75 million by more than 15% (i.e. a price greater than $5.47
million), Mr. Vajna shall have the right to match such greater offer. This
right must be exercised by Mr. Vajna within fifteen (15) days from the date
of notice of such third-party offer. In the event the third party raises the
bid matched by Mr. Vajna, then Mr. Vajna will again have the right to match
and so on. If at any time Mr. Vajna does not exercise this right, CPEI may
proceed with the sale of the development projects to such third party;
provided that such sale is consummated within the following thirty (30) days.
If no third-party offer is received by CPEI greater than $5.47 million, then
Mr. Vajna's offer of $4.75 million shall be accepted. A comprehensive list
of the development projects will be attached to this letter as Exhibit A
after approval by Mr. Vajna.
CPEI will continue to pay all costs and obligations in the normal course of
business on these development projects until the sale to Mr. Vajna is
completed. Assuming the sale to Mr. Vajna is completed, he will assume the
non-contingent obligation on the project entitled TRAPPED in the amount of
$1,000,000, the non-contingent obligations on the project entitled, I SPY in
the amount of $350,000, the non-contingent blind script commitment to William
Wisher in the amount of $700,000, and all other contingent and non-contingent
obligations in connection with these projects and the other development
projects.
3. EMPLOYMENT AGREEMENTS. Mr. Vajna offers to terminate his existing
employment agreement, effective as of September 30th conditioned upon the
acceptance by the Board of Directors of the terms hereof as such terms may be
amended by negotiations hereto and the execution of a deal memorandum
containing the terms hereof. For such termination Mr. Vajna shall be paid by
CPEI fifty percent (50%) of the amounts that would be payable to him from
the termination date until December 31, 1998. Such amount shall include the
sum of $135,000 as a settlement of the applicable percentage of Mr. Vajna's
"perk package". The foregoing termination provisions shall not cover Mr.
Vajna's continuing participation's as a producer of CPEI's completed films,
including DIE HARD, TOMBSTONE and EVITA which participations shall survive
such termination. Mr. Vajna will be free to enter into a third party
producing or other employment or consulting agreement upon satisfaction of
the conditions contained in the first sentence of this paragraph subject only
to the completion of the Disney Deal and the Fox Deal, his continued
non-exclusive consulting with CPEI regarding the disposition of its assets
and other related matters, and to his potential reinstatement by the Board of
Directors if either of the Disney or Fox agreements are not concluded by
CPEI. In the event of such reinstatement, CPEI would re-acquire at Mr.
Vajna's cost the development projects if he purchased them.
<PAGE>
Cinergi Pictures Entertainment, Inc.
May 30, 1997
Page 3
4. MERGER OFFER. Because of CPEI's present status, the independent members
of the Board of Directors of CPEI may decide that it is in the best interests
of the stockholders of CPEI to merge with an acquisition entity of Mr. Vajna.
Pursuant to a one-step merger proposal, all the outstanding shares of CPEI
owned by persons other than Mr. Vajna would be acquired or redeemed for cash
based upon the net worth of CPEI at such time, and in the same transaction,
the remaining assets and all liabilities would be merged into an acquisition
entity owned by Mr. Vajna (the "Merger Offer"). As a result of that
transaction, Mr. Vajna would effectively assume the economic consequences of
all unknown and unresolved contingent liabilities of CPEI existing as of the
date of the transaction, and any and all new claims, liabilities and
obligations of CPEI arising after that date. Accordingly, if CPEI decides to
proceed with the Merger Offer, Mr. Vajna, subject to the negotiation of
specific merger terms, hereby agrees to proceed with the merger transaction
and accept the aforementioned economic consequences of acquiring CPEI,
provided that all of the following conditions precedent have been satisfied
and completed in full prior to the effective date of the transaction:
(a) FISHBURN LITIGATION. CPEI is the defendant in a lawsuit brought by
Lawrence Fishburn in which Mr. Fishburn is claiming damages of $1.75 million.
Prior to the Merger Offer, one of the following must occur: (i) the lawsuit
must be dismissed with prejudice, (ii) the lawsuit must be finally settled
and all payment obligations pursuant to such settlement satisfied in full, or
(iii) CPEI must establish a reserve reasonably acceptable to Mr. Vajna
sufficient to satisfy CPEI's expected liabilities and costs in connection
with such lawsuit and/or settlement.
(b) BROADWAY BRAWLER. CPEI is currently in negotiations to settle all
claims and receive reimbursement arising out of the terminated production of
the film BROADWAY BRAWLER. Prior to the Merger Offer, (i) all claims against
CPEI in connection with such production must be finally settled and all
payment obligations pursuant to such settlement satisfied in full; (ii) CPEI
must receive reimbursement for its costs and indemnification from liability
on all loans, costs and other obligations incurred by CPEI in connection with
such production; and (iii) CPEI must establish a reserve reasonably
acceptable to Mr. Vajna sufficient to satisfy other contingent liabilities,
claims and costs of CPEI in connection with the termination of such
production.
(c) D&0 INSURANCE. CPEI must obtain a policy of directors and officers
liability insurance with a limit of not less than $10 million per occurrence
and deductible of no more than $1 million per claim. The policy must be
maintained in effect for a minimum of four (4) years following the closing
date of the Merger Offer. All premiums for such insurance policy must be
prepaid prior to the Merger Offer. Further, prior to the Merger Offer, CPEI
must establish a reserve reasonably acceptable to Mr. Vajna for the retention
of the deductible amounts under such insurance policy.
<PAGE>
Cinergi Pictures Entertainment, Inc.
May 30, 1997
Page 4
(d) ALTERNATIVE MINIMUM TAX. CPEI must establish a reserve reasonably
acceptable to Mr. Vajna for the payment of any alternative minimum tax
obligation of CPEI for the year 1997.
(e) BRITISH SALE-LEASEBACKS. CPEI, through one or more of its
subsidiaries, entered into certain sale-leaseback transactions in the United
Kingdom with respect to the films JUDGE DREDD and EVITA. Prior to the Merger
Offer, CPEI must be indemnified by a party acceptable to Mr. Vajna for all
costs, contingent or otherwise, in the possible "unwinding" these
sale-leaseback transactions.
(f) DIE HARD. CPEI must sell to Twentieth Century Fox ("Fox") all rights
to distribute the film DIE HARD WITH A VENGEANCE (DIE HARD) within all
distribution territories presently controlled by Fox. In addition, with
respect to the rights to distribute DIE HARD within all distribution
territories presently controlled by CPEI, CPEI must either (i) consummate a
sale of such rights to one or more third parties, or (ii) for purposes of the
Merger Offer, assign to such rights a value acceptable to Mr. Vajna.
(g) SPECIAL EFFECTS FACILITY. CPEI, through a subsidiary, owns a special
effects facility and associated equipment located in Lenox, Massachusetts.
Prior to the Merger Offer, CPEI must either (i) consummate a sale of such
facility and equipment to a third party, or (ii) for purposes of the Merger
Offer, assign to such facility and equipment a value acceptable to Mr. Vajna.
(h) EVITA SOUNDTRACK. CPEI owns the exploitation rights to the
soundtrack for the film EVITA. Prior to the Merger Offer, CPEI must either
(i) consummate a sale of such rights to a third party, or (ii) for purposes of
the Merger Offer, assign to such rights a value acceptable to Mr. Vajna.
(i) OLIVER STONE COMMITMENTS. CPEI has certain payment obligations to
Oliver Stone under a "first look" agreement that expires in February 1998.
Prior to the Merger Offer, CPEI must either (i) satisfy in full of its
payment obligations under such agreement, or (ii) establish a reserve
reasonably acceptable to Mr. Vajna sufficient to satisfy CPEI's obligations
under such agreement.
(i) LEGAL FEES RECEIVABLE. In connection with an investigation of Mr.
Vajna's personal tax returns, CPEI advanced legal fees to certain of its
officers, directors and employees. Prior to the Merger Offer, these advances
shall be reclassified on the books of CPEI as receivables due to CPEI from
Mr. Vajna. All other legal fees receivable from officers and directors
incurred in litigation against CPEI in the ordinary course of its business
shall be collected or written off, as the Board of Directors shall determine.
<PAGE>
Cinergi Pictures Entertainment, Inc.
May 30, 1997
Page 5
(k) ALAN SMITHEE. CPEI must prior to the Merger Offer (i) deliver the
film, and (ii) satisfy all bank and other obligations, or (iii) establish a
reserve sufficient to meet all of CPEI's obligations regarding the picture.
(l) EMPLOYEES. Prior to the Merger Offer all employees with or without
contracts must be settled out or severance paid, as appropriate. CPEI must
establish a reserve reasonably acceptable to Mr. Vajna sufficient to satisfy
CPEI's expected liabilities and costs in connection with such severance
and/or settlements.
(m) DISNEY DEAL. Prior to the Merger Offer CPEI must have concluded the
Disney Deal with no material modifications to its current form.
5. DUE DILIGENCE PERIOD. The terms and conditions of the offer set forth in
this letter have been based upon a preliminary examination and evaluation of
the assets and liabilities of CPEI. However, a thorough due diligence review
has not been completed. Accordingly, Mr. Vajna reserves the right to further
due diligence with respect to the assets and liabilities of CPEI during the
forty-five (45) days following acceptance with the possibility that he may
modify the offer contained in this letter based upon the results of such due
diligence. Any acceptance by CPEI of Mr. Vajna's offer may be rescinded by
CPEI if, as a result of the due diligence, Mr. Vajna subsequently modifies
the terms of this proposal.
This offer will remain open during a period of reasonable good faith
negotiations between Mr. Vajna and CPEI, not to exceed thirty (30) days from
the date hereof.
Sincerely,
/s/ SKIP BRITTENHAM
Skip Brittenham
HMB:hdw
cc: Andrew G. Vajna
Ronald L. Blanc
<PAGE>
EXHIBIT 2
[LETTERHEAD]
June 11, 1997
Harry M. Brittenham, Esq.
Ziffren, Brittenham, Branca & Fischer
1801 Century Park West
Los Angeles, CA 90067-6406
Dear Skip:
Thank you for your letter of May 30, 1997. The purpose of this letter
is to:
1) respond specifically to your May 30, 1997 letter;
2) summarize the remaining open points;
3) and most importantly, create a detailed framework within which we
can move towards a rapid closure of our proposed transaction.
I will attempt to organize my comments according to the numbered paragraphs
of your May 30, 1997 letter.
1. OVERVIEW. Let me begin by noting that your proposal substantially
narrows the remaining open issues. We appreciate your efforts to create a
transaction structure which is in the best interests of all Cinergi
shareholders.
As we discussed on the telephone, rather than continue to refine your
May 30th letter of discussion points to the point it becomes a formal binding
offer to the Company, we believe the most efficient next step is negotiate a
definitive merger agreement. We have instructed John McHale of Gipson,
Hoffman and Pancione to begin preparing that document and expect to be able to
provide a first draft to you for your review within the next week to ten
days. Our goal is to have a document in final form by the end of June.
2. DEVELOPMENT PROJECTS. With respect to the development projects,
the Company has requested that Mr. Vajna increase his minimum bid to $5
million. I am aware that on behalf of Mr. Vajna you have rejected that
request and that your minimum bid remains $4.75 million. We have decided to
accept that minimum bid.
Please note that some of the language in your May 30, 1997 letter is
inconsistent with the bidding procedures we have chosen to employ as we
market the development projects. Two points are particularly important.
First, although we will require an initial overbid of $5.47 million, there
will be no "last match" by either Mr. Vajna or any other purchaser. To the
extent
<PAGE>
Harry M. Brittenham, Esq.
June 11, 1997
Page 2
we receive a qualified overbid, we will simply conduct a pure auction. The
highest bid will win. As we discussed on the telephone, I know you agree that
this is clearly in the best interest of all of our shareholders. Second,
please note that the bidding procedures will require the ultimate purchaser
to reimburse the Company for any development expenditures incurred from May 1,
1997 through the closing of the sale of the development projects. A schedule
outlining the actual payments since May 1st and the projected payments through
September 1, 1997 is enclosed for your review. That identical schedule will
be provided to all prospective purchasers. Finally, I would like to highlight
one mechanical matter. To the extent Mr. Vajna is the successful bidder, at
the end of the sixty-day period the Company will enter into a binding
agreement to sell the development projects to Mr. Vajna subject to, and in
conjunction with, closing of the contemplated merger.
A draft copy of the cover letter which will accompany the development
package and which outlines the bidding procedures in detail is also enclosed
for your review.
3. EMPLOYMENT AGREEMENT. As we discussed on the telephone, I would
like to suggest that Mr. Vajna's employment be terminated at the closing. At
the closing Mr. Vajna would receive 100% of his unpaid base salary through
December 31, 1997 and 50% of his base salary for the year of 1998. Although
we recognize that the termination provision does not cover continuing
participations, please note that those obligations are being transferred to
Disney and Cinergi. Your lawyer should review that documentation to make sure
that they are comfortable, that Disney and Cinergi recognize those
obligations. We have discussed the issue with both of those entities and
believe they are comfortable with those obligations. We agree that Mr. Vajna
will be free, upon the execution of our merger documents and signing of the
Fox Agreement, to enter into a third party producing or other employment or
consulting agreement, but in the event the agreement with Disney is
terminated by either party thereto or pursuant to the terms of the Disney
Agreement and the closing does not take place, the merger document would
terminate without liability of either party to the other and Mr. Vajna would
be required to return to the public Cinergi and resume his duties pursuant to
the terms of his current employment agreement.
4. MERGER OFFER. Covered under paragraph 1 above.
(a) FISHBURN LITIGATION. As we discussed on the telephone, we
recognize this is a continuing obligation of CPEI. If this issue has not
resolved itself by closing, we will mutually agree on an appropriate reserve.
(b) BROADWAY BRAWLER. I am happy to report the BRAWLER transaction
has closed. All monies have been transferred. Please perform whatever due
diligence you deem necessary to confirm this fact.
(c) D&O INSURANCE. Mr. Braverman is in the process of obtaining a
six-year policy which has been reviewed by Ron Blanc and we believe it is
acceptable to Mr. Blanc. Please confirm. Also, please note that there is a
portion of the premium which is allocable to post-closing employment
practices. That portion of the premium will be an obligation of Mr. Vajna's.
<PAGE>
Harry M. Brittenham, Esq.
June 11, 1997
Page 3
(d) ALTERNATIVE MINIMUM TAX. We recognize this is an obligation of
Cinergi. We have asked Ernst & Young to quantify the amount.
(e) BRITISH SALE-LEASEBACK. Mr. Braverman is in the process of
arranging a satisfactory resolution of this contingent liability. We expect
that this will be acceptable to you and therefore will eliminate this issue.
We will keep you apprised.
(f) DIE HARD. We are in the final stages of definitive documentation
with respect to DIE HARD.
(g) SPECIAL EFFECTS FACILITY. As you know, Disney has expressed some
interest in purchasing the special effects facility. To the extent a
transaction has not closed by the date of the merger, we would expect to
transfer that facility to Mr. Vajna at its current book value. That book
value is approximately $3.2 million as of March 31, 1997. Please confirm this
as acceptable.
(h) EVITA SOUNDTRACK. We expect to sell the EVITA soundtrack prior to
the execution of the merger document. I will let you know if that changes.
(i) OLIVER STONE COMMITMENTS. In my last conversation with Mr.
Vajna, he indicated that he expected to have a satisfactory resolution of
this matter. Please confirm.
(j) LEGAL FEES RECEIVABLE. Please note that the legal fees paid by
Cinergi for employees to be paid by Mr. Vajna are already classified as
receivables on CPEI's books. We will confirm the amount with you and expect it
to be paid by Mr. Vajna in due course.
(k) ALAN SMITHEE. It is my understanding that this issue has been
resolved. Please confirm.
(l) EMPLOYEES. The Board of Directors has approved a severance plan,
which of course was reviewed with Mr. Vajna. All severance payments will be
made prior to closing. The only remaining items to be settled are Mr. Vajna's
and Mr. Braverman's employment contracts. I believe we have an agreement
under the principle on Mr. Vajna as noted under paragraph 3 above. The
company will settle Mr. Braverman's employment contract prior to closing.
(m) DISNEY DEAL. As you know, we expect the due diligence on the
Disney transaction to be completed by June 13, 1997, thereby eliminating the
major condition to Disney's obligation to purchase the library.
(n) INDEMNITY. The private company would remain obligated to
indemnify, defend, advance monies and hold harmless its former employees
pursuant to the terms of various indemnity agreements and undertakings to
reimburse indemnification costs to Cinergi (public corporation).
<PAGE>
Harry M. Brittenham, Esq.
June 11, 1997
Page 4
5. DUE DILIGENCE PERIOD. This paragraph is no longer relevant, as we
are moving directly in a definitive agreement.
Finally, please note that it is the Company's current intention to
make a press release summarizing both the current state of negotiations with
Mr. Vajna and updating our shareholders on the progress of the Disney and Fox
transactions within the next week to ten days. We would like to have a final,
definitive agreement with Fox before we make that press release. We expect to
have that agreement within the next week.
I look forward to continuing to work with you towards a successful
transaction.
Sincerely,
/s/ R. TIMOTHY O'DONNELL
-------------------------------
R. Timothy O'Donnell
Enclosures: Schedule 1 -- Development Cost Commitments
Schedule 2 -- Development Bidding Procedures Letter
cc: Warren Braverman
Greg Paul
John Schuster
John McHale
Randy Paul
Dede Lebovits
RTO'D/dm
