SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended JUNE 30, 2000 or
/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number: 0-18613
TRIMARK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4272695
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4553 GLENCOE AVE., SUITE 200
MARINA DEL REY, CALIFORNIA 90292
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(310) 314-2000
Securities registered pursuant to Section 12(b) of the Act:
(NONE)
Name of each exchange on which registered: (NONE)
Securities registered pursuant to Section 12(g) of the Act:
Title of Class:
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of September 1, 2000, the aggregate market value of Common Stock held by
non-affiliates of the registrant was approximately $24,684,297. All officers,
directors and more than ten percent (10%) shareholders of the registrant are
deemed "affiliates" of the registrant solely for the purpose of calculating such
aggregate market value.
The number of shares of Common Stock of the registrant outstanding as of
September 1, 2000 was 4,760,600, excluding shares held by the registrant as
treasury stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
ITEM 1. BUSINESS
GENERAL
Trimark Holdings, Inc., a Delaware corporation (the "Company"), through its
wholly-owned subsidiary, Trimark Pictures, Inc., a California corporation
("Trimark"), is a worldwide distributor of entertainment software, primarily
engaged in the distribution of feature films in the domestic home video and
theatrical markets and in the licensing of distribution rights to motion
pictures for international markets. Trimark Television, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company, licenses television
rights to feature films, television series, music and children specials, and
documentaries in both the international and domestic markets.
As an independent distribution company, the Company acquires the rights to
motion pictures from a variety of sources, including studios, production
companies and independent producers. Generally, the Company acquires the rights
to completed motion pictures. However, in order to secure rights to motion
pictures which might not otherwise be available to the Company and to acquire a
wider array of distribution rights on more favorable terms, the Company also
secures the rights to motion pictures prior to or during production. The Company
distinguishes itself from the major motion picture studios and certain other
independent video distribution companies by acquiring rights to motion pictures
which may not be cost effective for many of its larger competitors to
distribute.
Distribution rights which the Company may acquire include: (a) DOMESTIC - home
video, - free television, pay television (including cable and pay-per-view), -
theatrical and - electronic publishing (b) INTERNATIONAL - all media.
The Company was formed in August 1984 and began operations as a domestic home
video distributor in early calendar year 1985 by acquiring exclusive home video
distribution rights to motion pictures and other audio-visual entertainment
programs which it packaged, advertised, promoted, sold, had duplicated, and
shipped to home video wholesalers for resale to retailers throughout the
country. The Company generally sells videocassettes to wholesale distributors
for resale to the approximately 20,000 video rental stores in the United States.
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ITEM 1. (CONTINUED)
In 1987, the Company began distributing and sublicensing motion pictures for
distribution in the international market. The Company considered this an
opportunity to grow in an area closely related to its video business, while
offering new opportunities to acquire broader distribution rights to motion
pictures in all media.
On May 15, 1990, the Company was re-incorporated in Delaware. The principal
assets of the Company are the capital stock of Trimark Pictures and Trimark
Television; the material business of the Company is conducted through these
companies. Unless noted otherwise, all references to the Company in this filing
include its subsidiaries.
On June 29, 1990, the Company effected an initial public offering of 1,300,000
shares of Common Stock and an additional 200,000 shares of Common Stock were
sold by selling stockholders.
On December 31, 1991, the Company acquired Trimark Television (which at the time
was named International Broadcast Systems, Ltd.) a publicly traded company, for
$1.6 million in cash. Trimark Television specializes in the distribution of
television programming, and licenses television productions to broadcasters
throughout the world.
On June 1, 1992, the Company changed its name from Vidmark, Inc. to Trimark
Holdings, Inc. On June 24, 1992, Trimark changed its name from Vidmark, Inc. to
Trimark Pictures, Inc. The name changes reflect the Company's diversification of
its distribution streams.
In March of 1993, the Company formed Trimark Interactive to expand the core
business of film production and video distribution into the emerging market for
interactive entertainment software and multimedia. In March 1997, the Company
sold substantially all assets (primarily intellectual properties and inventory)
of Trimark Interactive to an unrelated independent entertainment and interactive
music publisher. The Company is no longer engaged in the market for interactive
entertainment software and multimedia.
On June 6, 2000, the Company, Lions Gate Entertainment Corp., a British Columbia
corporation ("Lions Gate") and LGE Merger Sub Inc., a Delaware corporation and a
wholly owned subsidiary of Lions Gate ("Merger Sub"), executed an Agreement and
Plan of Merger (the "Merger Agreement") providing for the acquisition of the
Company by the form of a merger (the "Merger") of the
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ITEM 1. (CONTINUED)
Company with and into Merger Sub, with Merger Sub surviving as a wholly owned
subsidiary of Lions Gate. In the Merger, each share of the common stock of the
Company ("Common Stock") will be exchanged for (i) US$4.50 in cash and (ii) two
(2) shares, without par value, of the common shares of Lions Gate (the "Lions
Gate Common Shares"); provided, however, that if the average of the last
reported sale price of Lions Gate Common Shares on the American Stock Exchange
during the 30 consecutive trading days ending October 6, 2000 (the "Current
Market Price") is less than US$2.75 per share, then the number of Lions Gate
Common Shares to be issued for each share of Common Stock shall be the result
obtained by dividing US$5.50 by the Current Market Price. The consummation of
the Merger is subject to the approval of the Merger by holders of a majority of
the Common Stock of the Company and to certain other customary closing
conditions. A special meeting of the stockholders of the Company to vote on the
Merger will be held on October 12, 2000. On September 26, 2000, the
shareholders of Lions Gate approved the Merger.
In connection with the Merger Agreement, Mark Amin, the Company's Chairman of
the Board and Chief Executive Officer, and his brother, Reza Amin, who
beneficially own, in the aggregate, approximately 45% of the outstanding Common
Stock, and Lions Gate entered into the Trimark Stockholders Voting Agreement,
dated June 6, 2000 (the "Voting Agreement"). Pursuant to the Voting Agreement,
Mark Amin and Reza Amin, solely in each of their individual capacities as a
stockholder of the Company, agreed, among other things, to vote their Common
Stock in favor of the Merger Agreement and the other transactions contemplated
thereby, and, except as provided by the Merger Agreement, against any competing
or alternative proposal.
In May 1999, the Company formed a majority owned subsidiary, CinemaNow, Inc., to
engage in the business of streaming films over the internet using Trimark
Pictures' library as well as acquiring the internet rights of other films or
film libraries. For further information regarding CinemaNow, see "Item
13 - Certain Relationships and Related Matters - CinemaNow, Inc."
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ITEM 1. (CONTINUED)
THE UNITED STATES MOTION PICTURE INDUSTRY
The United States motion picture industry encompasses the production and
theatrical exhibition of feature-length motion pictures and the subsequent
distribution of such pictures in home video, television and other ancillary
markets. The industry is dominated by the major studios -- some of which have
divisions which are promoted as "independent" distributors of motion pictures --
including Universal Pictures, Warner Brothers (including Turner Pictures, New
Line Cinema and Castle Rock Entertainment), Twentieth Century Fox, Sony Pictures
Entertainment (including Columbia Pictures and Tristar Pictures), Paramount
Pictures, The Walt Disney Company (including Buena Vista, Touchstone and
Miramax) and MGM (including Metro Goldwyn Mayer Pictures, United Artists
Pictures, Orion Pictures and Goldwyn Entertainment Company), which historically
have produced and distributed the majority of theatrical motion pictures
released annually in the United States. In recent years, however, "independent"
motion picture production companies have played an important role in the
production of motion pictures for the worldwide feature film market. There are
also a large number of smaller production companies such as the Company and
other entities that produce theatrical motion pictures.
The "majors" generally own their production studios and have national or
worldwide distribution organizations. Major studios typically release films with
direct production costs generally ranging from approximately $25 million to $100
million or more, and provide a continual source of motion pictures to the
nation's theatrical exhibitors. The independents do not own production studios
and, with certain exceptions, have more limited distribution capabilities than
the major studios. Independents typically produce fewer motion pictures at
substantially lower average production costs than major studios.
MOTION PICTURE PRODUCTION AND FINANCING. The production of a motion picture
begins with the screenplay adaptation of a popular novel or other literary work
acquired by the producer or the development of an original screenplay having its
genesis in a story line or scenario conceived of or acquired by the producer. In
the development phase, the producer typically seeks production financing and
tentative commitments from a director, the principal cast members and other
creative personnel. A proposed production schedule and budget also are prepared
during this phase.
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ITEM 1. (CONTINUED)
Upon completing the screenplay and arranging financing commitments,
pre-production of the motion picture begins. In this phase, the producer engages
creative personnel to the extent not previously committed; finalizes the filming
schedule and production budget; obtains insurance and secures completion
guarantees, if necessary or available; establishes filming locations and secures
any necessary studio facilities and stages; and prepares for the start of
principal photography.
Principal photography, the actual filming of the screenplay, may extend from
four to sixteen weeks or longer, depending upon such factors as budget,
location, weather and complications inherent in the screenplay. Following
completion of principal photography, the motion picture is edited, opticals,
dialogue, music and any special effects are added, and voice, effects and music
sound tracks and picture are synchronized during post-production. This results
in the production of the negative from which the release prints of the motion
picture are made.
The cost of a motion picture produced by an independent production company for
limited distribution ranges from approximately $1 million to $12 million as
compared with $25 million to $100 million or more for commercial films produced
by major studios for wide release. Production costs consist of acquiring or
developing the screenplay, film studio rental, cinematography, post-production
costs and the compensation of creative and other production personnel.
Distribution expenses, which consist primarily of the costs of advertising and
release prints, are not included in direct production costs.
The major studios generally fund production costs from cash flow from their
motion picture and related activities, licensing fees generated from film
library holdings, and, in some cases, from unrelated businesses. Substantial
overhead costs, consisting largely of salaries and related costs of the
development, production, distribution and marketing staff and physical
facilities maintained by the major studios, also must be funded.
Independent production companies generally avoid incurring substantial overhead
costs by hiring creative and other production personnel and retaining the other
elements required for pre-production, principal photography and post-production
activities on a project-by-project basis. Unlike the major studios, the
independents also typically finance their production activities from bank loans,
"pre-sales" agreements, equity offerings and joint ventures. Independents
generally attempt to complete their financing of a motion picture production
prior to commencement of principal photography, at
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ITEM 1. (CONTINUED)
which point substantial production costs begin to be incurred and require
payment.
"Pre-sales" are often used by independent film companies to finance all or a
portion of the direct production costs of a motion picture. Pre-sales consist of
license fees paid to the producer by third parties in return for the right to
exhibit the completed motion picture in theaters or to distribute it in home
video, television, international or other ancillary markets. Producers with
distribution capabilities may retain the right to distribute the completed
motion picture either domestically or in one or more foreign markets. Producers
may separately license theatrical, home video, television, foreign and all other
distribution rights among several licensees. The producer may also at times be
able to acquire additional production funds through "gap financing," whereby a
lender loans a portion of the production funds based on a distributor's estimate
of the value of distribution rights. Although "gap financing" is currently
available through a variety of lenders, there can be no assurance such lenders
will continue to make funds available on this basis in the future.
Both major studios and independent film companies often acquire motion pictures
for distribution through a customary industry arrangement known as a "negative
pickup," under which the studio or independent film company agrees to acquire
from an independent production company all rights to a film upon completion of
production. The independent production company normally finances production of
the motion picture pursuant to financing arrangements with banks or other
lenders in which the lender is granted a security interest in the film and the
independent production company's rights under its arrangement with the studio or
independent. When the studio or independent "picks up" the completed motion
picture, it assumes or pays the production financing indebtedness incurred by
the production company in connection with the film. In addition, the independent
production company is paid a production fee and generally is granted a
participation in the net profits of the motion picture.
Both major studios and independent film companies generally incur various
third-party participations in connection with the production and distribution of
a motion picture. These participations are contractual rights of actors,
directors, screenwriters, owners of rights and other creative and financial
contributors entitling them to share in revenues or net profits (as defined in
the respective agreements) from a particular motion picture. Except for the most
sought-after talent,
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ITEM 1. (CONTINUED)
participations are generally payable after all distribution and marketing fees
and expenses, direct production costs and financing costs are paid in full.
MOTION PICTURE DISTRIBUTION.
Motion picture distribution encompasses the distribution of motion pictures in
theaters and in ancillary markets such as home video, pay-per-view, pay
television, broadcast television, foreign and other markets. The distributor
typically acquires rights from the producer to distribute a motion picture in
one or more markets. For its distribution rights, the distributor typically
agrees to advance the producer a certain minimum royalty or guarantee, which is
to be recouped by the distributor out of revenues generated from the
distribution of the motion picture and is generally nonrefundable. The producer
also is entitled to receive a royalty equal to an agreed-upon percentage of all
revenues received from distribution of the motion picture over and above the
royalty advance.
THEATRICAL DISTRIBUTION. The theatrical distribution of a motion picture
involves the manufacture and transportation of release prints, the promotion of
the picture through advertising and publicity campaigns and the licensing of the
motion picture to theatrical exhibitors. The size and success of the promotional
advertising campaign can materially affect the revenues realized from the
theatrical release of a motion picture. The major studios can spend in excess of
$50 million to promote motion pictures, and have average combined print and
advertising costs in excess of $20 million. The costs incurred in connection
with the distribution of a motion picture can vary significantly, depending on
the number of screens on which the motion picture is to be exhibited and the
competition among distributors for theaters during certain seasons. Similarly,
the ability to exhibit motion pictures in the most popular theaters can affect
theatrical revenues.
The distributor and theatrical exhibitor generally enter into an arrangement
providing for the exhibitor's payment to the distributor of a percentage of the
box office receipts for the exhibition period, in some cases after deduction of
the theater's overhead, or a flat negotiated weekly amount. The distributor's
percentage of box office receipts varies widely, depending upon the success of
the motion picture at the box office and other factors. Distributors carefully
monitor the theaters which have licensed the picture for exhibition to ensure
that the exhibitor promptly pays all amounts due the distributor. Substantial
delays in collection are not unusual.
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Successful motion pictures may continue to play in theaters for up to four (4)
months or longer following their initial release. Concurrently with their
release in the United States, motion pictures generally are released in Canada
and may also be released in one or more other foreign markets. Motion pictures
are generally made available for distribution in markets subsequent to
theatrical as follows:
Months After Approximate
Initial Release Release Period
--------------- --------------
Domestic home video 4-6 months ---
Domestic pay-per-view 6-9 months 3 months
Domestic pay television 10-18 months 12-21 months
Domestic network or basic cable 30-36 months 18-36 months
Domestic syndication 30-36 months 3-15 years
Foreign home video 6-12 months ---
Foreign television 18-24 months 3-12 years
HOME VIDEO. The home video distribution business involves the promotion and sale
of videocassettes and videodiscs to local, regional and national video retailers
(e.g., video specialty stores, convenience stores, record stores and other
outlets), which then rent or sell such videocassettes and videodiscs to
consumers primarily for private viewing.
Certain films are not initially released theatrically but may instead be
initially released to home video. Given the increasing preference of retail
video stores for successful theatrical releases, it has become increasingly
difficult to secure the initial release of a film directly to home video, and
the economic opportunity for such films where such a release is obtained has
greatly diminished. To address the change in preference in the domestic home
video market, the Company has focused its resources on distributing an increased
number of specialized films theatrically as well as films premiering on pay
television, and decreasing the releases of straight-to-video films. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Major feature films are usually scheduled for release in the home video market
within four to six months after theatrical release to capitalize on the
theatrical advertising and publicity for the film. Promotion of new releases is
generally undertaken during the nine to twelve weeks before the release date.
Videocassettes of feature films are generally sold to domestic wholesalers at
approximately $40 to $60 per unit and generally are rented by consumers for fees
ranging from $1 to $5
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ITEM 1. (CONTINUED)
per day. Wholesalers who meet certain sales and performance objectives may earn
rebates, return credits and cooperative advertising allowances. Selected titles,
including certain made-for-video programs, are priced significantly lower to
encourage direct purchase by consumers. Direct sale to consumers is referred to
as the "priced-for-sale" or "sell through" market. Many video distributors have
also entered into revenue sharing arrangements with major video retail stores.
Under such arrangements, videocassettes are sold at a reduced price to video
rental stores and a percentage of the video rental revenue is then shared with
the owners (or licensors) of the films. Home video arrangements in international
territories are similar to those in domestic territories except that the
wholesale prices may differ.
Overall growth in the domestic home video market has slowed as growth in the
number of new outlets and new VCR homes has moderated. The growth in outlets
designed to specifically serve the rental market has decreased over the past
several years, while the number of outlets which offer videocassettes and
digital video discs (DVD) for sale has increased. The sell through market
continues to grow with strong sales in the traditional family entertainment
market and a growing number of hit feature films initially released at prices
generally below $30. Furthermore, technological developments which internet
companies, regional telephone companies and others are developing could make
competing delivery systems economically viable and could affect the home video
marketplace.
PAY-PER-VIEW. Pay-per-view television allows cable and satellite television
subscribers to purchase individual programs, including recently released motion
pictures and live sporting, music or other events, on a "per use" basis. The
subscriber fees are typically divided among the program distributor, the
pay-per-view operator and the cable system operator.
PAY TELEVISION. Pay television allows subscribers to view premium channels such
as HBO/Cinemax, Showtime/The Movie Channel and other pay television networks
offered by cable and satellite system operators for a monthly subscription fee.
The pay television networks acquire a substantial portion of their programming
from motion picture distributors. New markets may develop with the maturation of
newly emerging direct broadcast satellite (DBS) systems and other digital
television systems.
BROADCAST AND BASIC CABLE TELEVISION. Broadcast television allows viewers to
receive, without charge, programming broadcast
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over the air by affiliates of the major networks (ABC, CBS, NBC and Fox), as
well as other networks (UPN and WB Network), independent television stations and
cable and satellite networks and stations. In certain areas, viewers may receive
the same programming via cable transmission for which subscribers pay a basic
cable television fee. Broadcasters or cable systems operators pay fees to
distributors for the right to air programming a specified number of times.
FOREIGN MARKETS. In addition to their domestic distribution activities, some
motion picture distributors generate revenues from distribution of motion
pictures in foreign theaters, home video, television and other foreign markets.
There has been a dramatic increase in recent years in the worldwide demand for
filmed entertainment. This growth is largely due to the privatization of
television stations, introduction of direct broadcast satellite services, and
increased home video and cable penetration.
OTHER MARKETS. Revenues also may be derived from the distribution of motion
pictures to airlines, schools, libraries, hospitals and the military, licensing
of rights to perform musical works and sound recordings embodied in a motion
picture, and licensing rights to manufacture and distribute merchandise,
clothing and similar commercial articles derived from characters or other
elements of a motion picture.
NEW TECHNOLOGIES. New means of delivery of entertainment product are constantly
being developed and offered to the consumer. The impact of emerging technologies
such as direct broadcast satellites and the internet, on the Company's
operations cannot be determined at this time. However, as a holder of
entertainment copyrights, the Company monitors these new media possibilities.
ACQUISITION OF MOTION PICTURE DISTRIBUTION RIGHTS BY THE COMPANY
GENERAL. Distribution rights to motion pictures can encompass various media
(e.g., theatrical, home video, free or pay television, electronic publishing)
and various markets or territories (e.g., the United States and Canada, Great
Britain, Japan). The Company prefers to acquire worldwide distribution rights to
a motion picture in all media wherever feasible.
The Company uses a similar decision making process in analyzing the acquisition
of a completed or an uncompleted movie. The Company collects information
concerning new motion pictures being contemplated or entering the production
cycle. This
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information is obtained from trade sources and from personal relationships and
contacts. The acquisition process focuses on productions which seem most likely
to fit the Company's requirements. Before the Company acquires distribution
rights for any motion picture, the Company analyzes not only the picture's
projected costs, revenues, and scheduling but also the effect of these
assumptions on overall Company performance. Management bases its acquisition
decisions on the results of this evaluation process and will not make offers
with risks that, in management's opinion, could materially adversely affect the
Company's profitability. The Company's credit facility imposes limitations on
the size of minimum guarantees or production or acquisition costs the Company
can incur without the lender's approval. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
When the Company acquires distribution rights to a motion picture prior to its
production, it makes only limited commitments to advance funds before
completion. After acquisition of the rights of a motion picture prior to its
production, the Company typically has approval rights over key production
elements and maintains a production supervisory staff to monitor the production
process. The Company's current policy is to acquire distribution rights for
motion pictures which will not be subject to material restrictions on release
and exhibition.
DOMESTIC HOME VIDEO DISTRIBUTION RIGHTS. The Company generally acquires domestic
(United States and Canadian) home video rights under exclusive licenses, for
terms ranging from five years to perpetuity, in return for a minimum guarantee
against future royalties based on a percentage of a videocassette's wholesale
net revenues. The value of a motion picture's domestic home video rights
generally increases as its domestic theatrical print and advertising budget
increases. Some of the Company's licenses require the licensor or theatrical
distributor to make minimum print and advertising expenditures. In other
instances, the Company has agreed to release and or pay print and advertising
expenses for a motion picture's theatrical distribution.
Domestic home video sales are promoted through regional direct sales personnel
who contact home video wholesale distributors and large retail video stores.
Substantially all of the Company's home video rental sales have been made to ten
(10) wholesale video distributors and two (2) retail video stores.
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In February 1994, the Company formed a sell through unit to maximize the profit
potential of its 600+ title library and acquire new products for the growing
video sell through and DVD market. Currently the Company distributes or sells
directly to mass merchandisers such as Wal-Mart, Costco, Target and Best Buy and
others who buy large volumes of the Company's videos and DVD's to be sold
directly to the consumer.
DOMESTIC THEATRICAL DISTRIBUTION RIGHTS. The Company acquires theatrical
distribution rights on a selective basis and distributes motion pictures for
exhibition by both major theater chains and numerous independent theaters
throughout the United States.
Management of the Company considers the theatrical distribution of film
important as a marketing tool which enhances video and international sales.
Accordingly, the Company seeks to acquire theatrical distribution rights as part
of an acquisition where possible, even if a film ultimately will not be released
theatrically. The Company released six films in the theatrical market during
fiscal 2000. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The Company currently targets motion pictures for
distribution to various demographic audiences on a specialized basis, and such
pictures can be distributed less expensively on a limited or more regional
basis. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Specialized motion pictures are characterized by
underlying literary and artistic elements intended to appeal primarily to
sophisticated or niche audiences and are generally substantially less expensive
to produce and distribute than films produced for wide release. It is not
uncommon for films to suffer theatrical losses primarily due to increased
advertising expenditures, but to have increased performance in video and other
ancillary media that may partially or totally offset such losses. The management
of the Company believes that the theatrical market has significant upside
potential should any particular film perform well. However, no assurance can be
made as to results with respect to any particular release.
The Company is in various stages of post production, production, development and
pre-production on a number of projects, and intends to release theatrically six
(6) to eight (8) films in fiscal 2001. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
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DOMESTIC TELEVISION DISTRIBUTION RIGHTS. The Company acquires television
distribution rights as part of the overall acquisition whenever possible. In
addition, television distribution rights are acquired specifically for
distribution by Trimark Television.
The Company hired additional personnel in fiscal 1998 to develop and oversee the
production and sales of long-form programming for initial release on broadcast
or major cable networks. The Company intends to sell four (4) to six (6) films
and "movies of the week" which will premier on major cable networks or broadcast
stations.
Television networks, independent television networks, television stations and
cable system operators generally license television series, films and film
packages (consisting of theatrically released feature films and
made-for-television movies) pursuant to agreements with distributors or
syndicators that allow a fixed number of telecasts over a prescribed period of
time for a specified cash license fee or for barter of advertising time.
Pay/Cable television services usually license pictures for initial exhibition
commencing approximately 10 to 18 months after initial domestic theatrical
release or six months after domestic home video release. Licensing of such
properties is generally accomplished pursuant to agreements which allow a fixed
number of telecasts over a prescribed period of time for a specified license
fee.
INTERNATIONAL DISTRIBUTION RIGHTS. International distribution rights include
rights in various media (e.g., television, theatrical and home video) and to
various territories (e.g., Germany, Italy, Japan and the United Kingdom). To
acquire these rights, the Company is usually required to pay a minimum
guarantee. The minimum guarantee, along with specific recoupable marketing and
other expenses, is recovered from the motion picture's gross revenues before the
producer begins to participate in the net revenues. The Company maintains a
sales force to manage international sales and to promote its motion pictures at
film markets, including the Cannes Film Festival in France, the American Film
Market (AFM) in Los Angeles and The Milan Film Festival (MIFED) in Italy.
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MARKETING AND SELLING
The Company's marketing operations are focused on domestic home video,
international licensing, theatrical distribution and television distribution.
The Company designs its own promotional campaigns for each motion picture;
commissions the art work for advertising, trade show displays and packaging; and
arranges for the printing, production and distribution of all promotional
materials.
Domestic home video sales are promoted through regional direct sales personnel
who contact home video wholesale distributors and large retail video stores. The
Company's largest wholesale video customer is Ingram Entertainment, which
represents approximately nine percent (9%) of net revenues for the fiscal year
ended June 30, 2000. The company's largest direct retail customers are
Blockbuster and Hollywood Video, which represent approximately 19% of net
revenues.
The Company, when appropriate, test markets its motion pictures in the domestic
theatrical market. If the response is satisfactory, the Company will proceed to
distribute the picture. The Company handles the sales, marketing and servicing
of its theatrical releases.
International sales operations consist of promoting and sublicensing the
Company's motion pictures to independent territorial distributors for release on
specified media within designated territories.
The Company maintains a sales force to manage international sales and to promote
its motion pictures at foreign film markets. The Company continues to expand its
worldwide television distribution in order to maximize the unexploited
television rights which it holds. The Company distributes product directly to
broadcasters in both the international and domestic markets and licenses product
for other companies and producers.
COMPETITION
The motion picture distribution business and other related entertainment
businesses are highly competitive. The Company's competitors in domestic home
video distribution have included the home video divisions of the major studios,
such as Warner Bros., The Walt Disney Company, Universal, Paramount, Fox and
Sony/Columbia; and independent distributors, including Artisan Entertainment.
Many of these competitors have greater access to
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ITEM 1. (CONTINUED)
feature films and significantly greater resources than the Company.
In the international distribution market, the Company competes with a wide range
of companies from small independents exclusively focused upon certain classes of
motion pictures like J & M Entertainment to the major studios which have
expanded distribution in international territories, such as Disney's Buena Vista
International.
INTELLECTUAL PROPERTY RIGHTS
Copyright protection is a serious problem in the video cassette distribution
industry because of the ease with which cassettes may be duplicated. In the
past, certain countries permitted video pirating to such an extent that the
Company did not consider these markets viable for distribution. Video
distributors, including the Company, have initiated legal actions to enforce
copyright protection and management believes the problem to be less critical at
the present time.
The Company is currently using the trademark, "TRIMARK PICTURES" in connection
with films distributed domestically and licensed internationally and has applied
for the trademark "CinemaNow" in the United States and certain other countries.
The trademark "TRIMARK PICTURES" has been registered with the Commissioner of
Patents and Trademarks. The Company regards its trademarks as valuable assets
and believes that its trademarks are an important factor in marketing its
products.
REGULATION AFFECTING THE COMPANY
Distribution rights to motion pictures are granted legal protection under the
copyright law of the United States and most foreign countries, which provide
substantial civil and criminal sanctions for unauthorized duplication and
exhibition of motion pictures. The Company endeavors to maintain copyright
protection for all its films under the laws of all applicable jurisdictions.
The Code and Ratings Administration of the Motion Picture Association of
America, an industry trade association, assigns ratings for age group
suitability for theatrical distribution of motion pictures. The Company submits
most of its films for such ratings. A substantial number of the Company's films
are rated "R;" under rules enforced by theatrical exhibitors, children under
certain ages may attend the applicable motion picture only if accompanied by an
adult.
16
ITEM 1. (CONTINUED)
In addition, United States television stations and networks as well as foreign
governments impose additional restrictions on the content of motion pictures
which may restrict in whole or in part exhibition on television or in a
particular territory. There can be no assurance, therefore, that current or
future restrictions on the content of Company films, may not limit or affect the
Company's ability to exhibit certain of such motion pictures in such media or
markets.
EMPLOYEES
As of June 30, 2000, the Company had 101 full-time employees, 42 of whom were
engaged in sales and marketing. None of the Company's employees are covered by a
collective bargaining agreement, although some of the Company's subsidiaries are
subject to guild agreements. Management believes that its employee relations are
good.
ITEM 2. PROPERTIES
The Company is leasing corporate office space in Marina del Rey, California for
a term of ten years expiring on September 3, 2009. These premises contain
approximately 27,000 square feet of office space.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to claims and suits arising from disputes over
copyrights, clear title and contractual matters arising from its distribution
contracts. Such proceedings are not considered material to the Company's
business.
17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable. No matters were submitted to a vote by the Company's security
holders during the fourth quarter of its fiscal year.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock began trading on the over-the-counter market on June
29, 1990 following the effectiveness of the Company's Registration Statement on
Form S-1. Prior to that date, there was no public market for the Common Stock.
The Common Stock is listed and reported on the National Association of
Securities Dealers Automated Quotation SmallCap Market ("NASDAQ") under the
symbol "TMRK." As of September 1, 2000, there were 4,760,600 shares of Common
Stock outstanding, excluding shares held by the Company as treasury stock, held
by approximately 40 shareholders of record. Until November 1998, the Common
Stock had been listed on the NASDAQ National Market, but was moved to the
SmallCap when the NASD panel determined the Common Stock did not meet applicable
public float requirements.
The following table sets forth the high and low sales prices as reported on
NASDAQ for fiscal 1999 and fiscal 2000.
Sales Prices for Common Stock
-----------------------------
Quarter Ending High Low
-------------- ---- ---
September 30, 1999 5 1/4 2 3/8
December 31, 1999 6 2 1/2
March 31, 2000 7 1/2 3 1/4
June 30, 2000 9 31/32 4 1/8
September 30, 1998 4 1/4 1 5/8
December 31, 1998 4 5/8 1 5/8
March 31, 1999 11 5/8 2 1/8
June 30, 1999 8 3/8 4 1/8
The Company has not paid any cash dividends since its organization and has no
present intention to pay cash dividends in the foreseeable future. The present
policy of the Company is to retain its earnings, if any, to provide funds for
the operation of its business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
18
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected financial data for the Company and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and with Management's Discussion and Analysis of Financial
Condition and Results of Operations which appear elsewhere in this report.
19
ITEM 6. (CONTINUED)
TRIMARK HOLDINGS, INC.
SELECTED FINANCIAL DATA
June 30,
------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(in thousands, except per share data)
Earnings statement data:
Net revenues:
Domestic:
Home video $ 60,240 $ 58,242 $ 48,053 $ 38,823 $ 34,615
Theatrical 2,913 1,123 8,297 5,380 286
Television 11,172 14,446 11,622 4,824 5,063
International:
All media 21,209 18,332 12,178 12,791 17,668
Interactive:
All media -- -- -- 1,347 2,200
------------------------------------------------------------
Net revenues 95,534 92,143 80,150 63,165 59,832
Film costs and distribution expenses 75,625 81,188 67,089 53,421 57,495
------------------------------------------------------------
Gross profit 19,909 10,955 13,061 9,744 2,337
Operating expenses:
Selling 7,055 7,209 7,461 6,857 6,352
General and administrative 7,044 5,465 5,100 4,239 5,447
Bad debt 343 (288) 1,109 321 31
------------------------------------------------------------
14,442 12,386 13,670 11,417 11,830
------------------------------------------------------------
Operating earnings (loss) 5,467 (1,431) (609) (1,673) (9,493)
Other (income) expenses:
Interest expense 2,639 3,849 4,443 1,934 847
Interest and investment income (3,026) (79) (172) (84) (95)
Minority interest (259) -- -- -- (38)
-------------------------------------------------------------
Earnings(loss) before income taxes 6,113 (5,201) (4,880) (3,523) (10,207)
Income taxes 402 (40) 299 -- (2,380)
-------------------------------------------------------------
Net earnings(loss) 5,711 ($ 5,161) ($ 5,179) ($ 3,523) ($ 7,827)
-------------------------------------------------------------
Other comprehensive income, net of tax ($ 2,607) $ 3,101 -- -- --
-------------------------------------------------------------
Comprehensive income(loss) $ 3,104 ($ 2,060) ($ 5,179) ($ 3,523) ($ 7,827)
-------------------------------------------------------------
Net earnings(loss) per common share:
Net earnings (loss) per
common share basic $ 1.24 ($ 1.19) ($ 1.24) ($ 0.84) ($ 1.83)
-------------------------------------------------------------
Net earnings (loss) per
common share fully diluted $ 1.23 ($ 1.19) ($ 1.24) ($ 0.84) ($ 1.83)
-------------------------------------------------------------
BALANCE SHEET DATA:
Total assets $ 78,605 $ 83,278 $ 89,220 $ 90,223 $ 48,401
Total liabilities 57,156 67,197 74,076 70,014 24,051
Retained earnings 4,531 (1,180) 3,981 9,160 12,683
Stockholders' equity 19,422 16,081 15,144 20,209 24,350
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES: Net revenues for the year ended June 30, 2000 increased $3.4
million or 4% compared with the prior fiscal year. The increase was primarily
attributable to increases in international, home video and theatrical revenue
offset by a decrease in television revenue. Net revenues increased $12 million,
or 15%, in fiscal 1999 compared to fiscal 1998. The increase was primarily
attributable to increases in most revenue segments including domestic home
video, television, and international distribution, partially offset by decreases
in revenue generated from theatrical exhibition.
To address the continuing competition in the domestic home video rental market,
in the periods presented, the Company has focused its resources on distributing
an increased number of films in the specialized theatrical market, the made for
television market and home video sell through and DVD market and decreasing the
releases of straight-to-video rental films. See "Liquidity and Capital
Resources." The production and distribution of theatrical motion pictures
requires capital commitments which may not be recouped, if at all, until the
picture is released in home video, international and ancillary markets.
DOMESTIC HOME VIDEO: Net revenues from domestic home video increased $2 million
or 3% for the year ended June 30, 2000 compared with fiscal year 1999. There was
minimal growth in the overall revenue for home video. There was, however,
significant change in the revenue components associated with home video, as home
video rental revenue decreased approximately 26% and the sell through and DVD
components increased over 55% and 100% respectively. The decrease in home video
rental revenue was due to the release of less commercially successful
theatrically exhibited films in fiscal 2000 as compared to fiscal 1999.
Increasing consolidation in the rental market has also contributed to the
decline in the home video rental market. The declining rental market has been
offset by the expansion of the sell through and DVD markets. During fiscal 2000,
the Company began releasing NBC product in the sell through market which
included the highly successful "Saturday Night Live" compilations. The Company
also released "Natural Born Killers, The Directors Cut" into the DVD market
which resulted in the Company's largest initial DVD sale to date.
Net revenues from domestic home video increased $10.2 million or 21% for the
year ended June 30, 1999 compared with fiscal year 1998. The increase in fiscal
1999 revenues was primarily due to the $6 million increase in DVD sales and $4
million increase in
21
ITEM 7. (CONTINUED)
video sell through sales. Fifty-five (55) DVD titles were released in fiscal
1999 as compared to only 5 in the prior fiscal year. Furthermore, the increased
emphasis on the exploitation of Trimark's 600+ title library contributed to the
increase in video sell through sales.
The Company anticipates that the domestic home video rental market will continue
to be extremely competitive.
DOMESTIC THEATRICAL DISTRIBUTION:
Net revenues from domestic theatrical distribution increased $1.8 million or
159% for the year ended June 30, 2000, compared with the prior year. The
increase was primarily attributable to the performance of "Held Up" in fiscal
2000, which had a mainstream release to go along with five specialized releases,
as opposed to fiscal 1999 which had six (6) specialized releases and no
mainstream release.
Net revenues from domestic theatrical distribution decreased $7.2 million or 86%
for the year ended June 30, 1999 compared with the prior year. The decrease was
primarily attributable to the performance of the wide theatrical release film in
the prior year period, "Eve's Bayou" (the title with the largest box office
receipts in Company history) with no comparable theatrical release in fiscal
1999. In fiscal 1999, the Company released six (6) motion pictures in the
specialized theatrical market compared to fiscal 1998 in which the Company
released six (6) motion pictures theatrically, two (2) mainstream - "Eve's
Bayou" and "Star Kid," three (3) specialized - "Box of Moonlight," "Chinese Box"
and "The Ugly" and one limited - "Chairman of the Board".
The Company anticipates releasing six (6) to eight (8) titles in the specialized
and limited theatrical markets in fiscal 2001 (see Liquidity and Capital
Resources).
TELEVISION DISTRIBUTION: Net revenues from television distribution which
includes such media as network, basic cable, pay television, pay-per-view and
syndication decreased $3.3 million or 23% for the year ended June 30, 2000
compared with the prior year. The decrease was primarily due to the Company's
first network movie-of-the-week film, "The Simple Life of Noah Dearborn" which
was released in fiscal 1999. The Company had no network releases in fiscal year
2000. The Company anticipates distributing four (4) to six (6) pictures for the
made for television market in fiscal 2001 (see Liquidity and Capital Resources).
22
ITEM 7. (CONTINUED)
In fiscal 1999, television revenue increased $2.8 million or 24% compared with
fiscal 1998. The increase was due to the release of "The Simple Life of Noah
Dearborn" in fiscal 1999, with no comparable release in the prior fiscal year.
INTERNATIONAL DISTRIBUTION: Net revenues from international distribution
increased $2.9 million or 16% for the year ended June 30, 2000 compared with the
prior year. Trimark released eleven (11) pictures into the international market
during fiscal 2000 as opposed to seven (7) during the prior year.
Net revenues from international distribution increased $6.2 million or 51% for
the year ended June 30, 1999 compared with the prior year. Trimark's business
plan emphasizes the production and acquisition of films with strong
international commercial appeal. Thus, the fiscal 1999 international releases of
"Cube," "Diplomatic Siege," and "King Cobra" were highly successful in this
market without any comparable commercially successful releases in fiscal 1998.
During fiscal 2001 the Company plans to release approximately ten (10) to twelve
(12) motion pictures initially into international distribution.
GROSS PROFIT: The Company's gross profit for the year ended June 30, 2000
increased $9 million or 82% compared with the prior year. The increase in gross
profit was primarily the result of the $3.4 million increase in gross sales
along with a $1.1 million decrease in film write downs to net realizable value
from $9.7 million during fiscal 1999 to $8.6 million in fiscal 2000. Gross
profits also increased as a result of the release of more profitable films in
fiscal 2000 as compared to 1999. Estimated total revenues and costs are reviewed
on a quarterly basis and revisions to amortization rates are made as necessary,
including write downs to net realizable value.
In fiscal 1999 gross profit decreased $2.1 million or 16% compared with the
prior year. The decrease in gross profit was primarily a result of the $9.7
million write down in fiscal 1999 coupled with the reduction in the estimated
future value of older films offset by a $12 million increase in gross sales.
These write downs primarily related to a charge associated with the lower than
anticipated performance of the January 1998 domestic theatrical release of "Star
Kid" and a write down associated with management's decision not to release
"Chairman of the Board" with a wide theatrical release, but rather to have a
selected market theatrical release.
23
ITEM 7. (CONTINUED)
SELLING EXPENSES: The Company's selling expenses decreased $154,000 or 2% for
the year ended June 30, 2000 compared with the prior year. The decrease was
primarily due to the Company's continued review of costs associated with film
festivals and markets, travel and entertainment costs as well as consulting
fees.
The Company's selling expenses decreased $252,000 or 3% in fiscal 1999 as
compared to the prior year primarily due to the reduction in theatrical
operations. The Company disbanded its regional theatrical sales operations
during the fourth quarter of fiscal 1998.
Selling expenses as a percentage of net revenues for fiscal 2000, fiscal 1999
and fiscal 1998 were 7%, 8% and 9%, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses increased $1.6 million or 29% for the year
ended June 30, 2000 compared with the prior year. The increase was largely due
to the increase in salaries associated with bonuses and the newly formed
subsidiary CinemaNow, Inc. The Company issued bonuses for the first time in five
years as a result of its return to profitability. Furthermore, normal salary
costs also increased as a result of a 25% increase in the salary of the Chief
Executive Officer of the Company who had not received a salary increase in seven
years. Also, CinemaNow, Inc. contributed $754,000 in general and administrative
expenses during the year which were not incurred in the previous fiscal year.
General and administrative expenses increased $365,000 or 7% for the year ended
June 30, 1999 compared with the prior year. The increase was primarily due to
increases in medical benefits, consulting and accounting fees.
BAD DEBT EXPENSE: Bad debt expense for the year ended June 30, 2000 increased
$631,000 or 219% compared with the same period in fiscal 1999 and decreased $1.4
million or 126% for the year ended June 30, 1999 compared with fiscal 1998. Bad
debt expenses for the periods primarily represent reserves taken against
domestic video and foreign sales. The increase was partially due to the $490,000
reserve for the video distributor MS Distribution which ceased doing business in
April 2000. During fiscal 1999 the Company collected $388,000 on past due video
sales, which reduced the reserve balance during the period. The Company took
$852,000 in reserves during fiscal 1998 due to the Asian currency crisis. No
comparable reserves
24
ITEM 7. (CONTINUED)
were taken during fiscal 1999 because of the recovering Asian economy.
INTEREST EXPENSE: Interest expense decreased $1.2 million or 31% for the year
ended June 30, 2000 compared with the prior year and decreased $594,000 or 13%
for the year ended June 30, 1999 compared with the year ended June 30, 1998. The
decrease in interest expense during fiscal 2000 was primarily due to lower
average borrowing levels as compared to fiscal 1999. The debt balance decreased
$14.3 million or 30% from June 30, 1999 to June 30, 2000. The debt balance
decreased $8.9 million or 15.6% from June 30,1998 to June 30,1999.
INTEREST AND INVESTMENT INCOME: Interest and investment income increased $2.9
million for the year ended June 30, 2000 compared with the prior year. The
increase was primarily due to the realized gain on the sale of Yahoo,Inc. shares
during fiscal 2000.
Interest and investment income decreased $93,000 for the year ended June 30,1999
compared with the prior year as all excess cash was used to reduce the Company's
debt.
NET EARNINGS/LOSS: The Company's net earnings for fiscal 2000 were $5.7 million,
an increase of $10.9 million or 211%. The increase was primarily due to the $9
million increase in gross profits along with the $3.0 million gain in the sale
of Yahoo, Inc. shares.
The Company's net loss for fiscal 1999 was $5.2 million. The fiscal 1999 loss
was primarily due to approximately $9.7 million in write downs to net realizable
value of film inventory. These write downs primarily related to charges
associated with the lower than anticipated video performances of the
theatrically released films "Star Kid" and "Chairman of the Board". The write
downs were partially offset by increased sales, lower bad debt expense and
interest charges.
OTHER COMPREHENSIVE INCOME: The other comprehensive income reported during the
twelve month period ending June 30, 2000 is a result of the realized and
unrealized gain in Yahoo!, Inc. shares resulting from the sale of the stock and
change in stock price during the period. The accumulated comprehensive income
reported at June 30, 2000 and June 30, 1999 resulted from the change in per
share price of Yahoo!, Inc. at June 30, 2000 and June 30, 1999.
25
ITEM 7. (CONTINUED)
Years Ended June 30,
-----------------------------
2000 1999
------------ ------------
(in thousands)
Unrealized holding gains arising during period $ 256 $ 3,101
Less: Reclassification adjustment for gains included in net income (2,439) --
Reversal of unrealized gain (424) --
------------ ------------
Other comprehensive income, net of tax (2,607) 3,101
------------ ------------
Prior period accumulated comprehensive income 3,101 --
Accumulated comprehensive income year end $ 494 $ 3,101
============ ============
INFLATION:
Generally, costs in connection with the acquisition and distribution of motion
pictures for release have increased in recent years. Such cost increases may
affect results of operations in the future; however, the Company believes that
the effect of such factors has not been material to date.
LIQUIDITY AND CAPITAL RESOURCES:
The Company relies on cash generated by operations and borrowings under its
credit facility to finance its operations. The Company's cash flows from
operating, investing and financing activities for the years ended June 30, 2000,
1999 and 1998 were as follows:
Years Ended June 30,
------------------------------------------
2000 1999 1998
------------ ------------ ------------
(in thousands)
Net cash provided(used) by
operating activities 8,306 10,083 (1,854)
Net cash provided (used) by
investing activities 4,795 (263) (316)
Net cash used by financing
activities (11,808) (8,858) (336)
Cash provided by operations decreased by $1.8 million for the fiscal year
ended June 30, 2000. The decrease was caused by a number of factors. Film
amortization costs decreased $5.8 million as the Company released more
profitable films and film write downs to net realizable value decreased from
the prior year. In addition, accounts receivable increased $4.1 million due
to a number of films being released late in the fiscal year to domestic
television and international markets as opposed to the prior fiscal year.
Additions to film costs also increased from the prior year by $3.5 million
primarily as a result of prints and advertising costs associated with the
mainstream release of the
26
ITEM 7. (CONTINUED)
film "Held Up." The Company did not have any mainstream theatrical releases
in the prior year. The change in inventory also increased by $1.2 million as
a result of the increase in sell through and DVD product due to the
production of over 300,000 units of the film "Jesus." The change in minimum
guarantees and royalties payable decreased by $4.9 million as the majority of
films in production were almost completed by fiscal year end as opposed to
the prior year when Turbulence II was in the middle of production. Finally,
the Company recognized $2.3 million on the sale of Yahoo!, Inc. shares,
whereas there was no comparable sale in the previous fiscal year. These
decreases were partially offset by a $10.9 million increase in net earnings
from the prior year and an increase of accounts payable of $6.7 million due
to the production of the "Jesus" units.
Investing activities for the year ended June 30, 2000, primarily consisted of
expenditures associated with the development of the CinemaNow website and income
from the sale of Yahoo, Inc. shares. Investing activities for 1999 and 1998 have
primarily consisted of expenditures on production equipment and computer
hardware and software.
Financing activities, consisting primarily of activity under the Company's
credit facility, decreased $3.0 million in fiscal year 2000 as compared to
fiscal year 1999. The decrease was primarily the result of the reduction in the
outstanding debt balance using proceeds obtained from operating cash flows along
with proceeds received from the sale of Yahoo, Inc. shares. This allowed the
Company to reduce its outstanding debt balance by $14.3 million or 30% from the
June 30, 1999 year end balance. Borrowings under the credit facility in fiscal
1999 and 1998 also decreased primarily as the result of the increase in
operating cash flow. The Company reduced its focus on theatrical distribution,
thereby reducing expenditures associated with prints and advertising costs.
On June 6, 2000, the Company, Lions Gate Entertainment Corp., a British Columbia
corporation ("Lions Gate") and LGE Merger Sub Inc., a Delaware corporation and a
wholly owned subsidiary of Lions Gate ("Merger Sub"), executed an Agreement and
Plan of Merger (the "Merger Agreement") providing for the acquisition of the
Company by the form of a merger (the "Merger") of the Company with and into
Merger Sub, with Merger Sub surviving as a wholly owned subsidiary of Lions
Gate. In the Merger, each share of the common stock of the Company ("Common
Stock") will be exchanged for (i) US$4.50 in cash and (ii) two (2) shares,
without par value, of the common shares of Lions Gate (the "Lions Gate Common
Shares"); provided, however, that if the average of the last reported sale price
of Lions Gate Common Shares on the American Stock Exchange during the 30
consecutive trading days ending October 6, 2000 (the "Current Market Price")
27
ITEM 7. (CONTINUED)
is less than US$2.75 per share, then the number of Lions Gate Common Shares to
be issued for each share of Common Stock shall be the result obtained by
dividing US$5.50 by the Current Market Price. The consummation of the Merger is
subject to the approval of the Merger by holders of a majority of the Common
Stock of the Company and to certain other customary closing conditions. A
special meeting of the stockholders of the Company to vote on the Merger will be
held on October 12, 2000. On September 26, 2000, the shareholders of Lions
Gate approved the Merger.
In connection with the Merger Agreement, Mark Amin, the Company's Chairman of
the Board and Chief Executive Officer, and his brother, Reza Amin, who
beneficially own, in the aggregate, approximately 45% of the outstanding Common
Stock, and Lions Gate entered into the Trimark Stockholders Voting Agreement,
dated June 6, 2000 (the "Voting Agreement"). Pursuant to the Voting Agreement,
Mark Amin and Reza Amin, solely in each of their individual capacities as a
stockholder of the Company, agreed, among other things, to vote their Common
Stock in favor of the Merger Agreement and the other transactions contemplated
thereby, and, except as provided by the Merger Agreement, against any competing
or alternative proposal.
The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., on December 20, 1996 entered into a $75 million
revolving credit facility with a consortium of banks agented and arranged by The
Chase Manhattan Bank which replaced a $25 million revolving credit facility with
Bank of America NT & SA and Westdeustche Landesbank. The credit facility expires
December 20, 2000. Under the credit agreement, the Company may borrow for
various corporate purposes provided that the aggregate borrowings do not exceed
the borrowing base, as defined in the Credit Agreement, which is derived from
specified percentages of approved accounts receivable and film library. The
credit agreement is guaranteed by the Company and certain of its subsidiaries
and is secured by substantially all of the assets of the Company and its
significant subsidiaries. Loans outstanding under the credit facility bear
interest at the rate of 1.5% above Chase Manhattan's prime rate or 2.5% above
the London Interbank Offered Rate for Eurodollars for the loan term specified.
An unused commitment fee is payable on the average unused availability under the
credit facility, at the rate of 0.3725% per annum. As of June 30, 2000 there was
$34 million outstanding under the credit facility.
The credit agreement contains various financial and other covenants to which the
Company must adhere. These covenants, among other things, require the
maintenance of minimum net worth and various financial ratios which are reported
to the bank on a
28
ITEM 7. (CONTINUED)
quarterly basis and include limitations on additional indebtedness, liens,
investments, disposition of assets, guarantees, affiliate transactions and the
use of proceeds. In relation to management's strategic review and release
schedule described below, the Company amended the current credit agreement as of
September 27,1999, December 20,1999, March 29, 2000, and June 16, 2000. The
amended agreement provides for less stringent minimum net worth ratios and
minimum equity requirement. In consideration for the adjustment of these ratios
and minimum equity requirement, the amended credit facility reduces the
borrowing limits over the remaining life of the credit facility. For the year
ended June 30, 1999, the borrowing limit was $60 million. By January 31, 2000,
the borrowing limit was reduced to $50 million and by June 30, 2000 was reduced
to $45 million. The amendments to the debt covenants and borrowing limits were
structured to incorporate the Company's overall strategy and presently planned
productions, acquisitions, distribution, and overhead expenditures. The Company
is in compliance with all debt covenants as of June 30, 2000.
It is expected that the Company's current credit facility will terminate upon
the Merger with Lions Gate, and that the Company will become party to Lions
Gate's credit facility. In the absence of the Merger, the Company would need to
extend its existing credit facility or arrange alternative financing, as the
current credit facility expires in December 2000.
In the domestic specialized theatrical market the Company plans to release six
(6) to eight (8) motion pictures during fiscal 2001. Furthermore, the Company
plans to release approximately thirty-six (36) motion pictures into the domestic
home video rental market and to continue to expand distribution in the sell
through market. The Company intends to sell four (4) to six (6) films and
"movies of the week" which will premier on major cable networks or broadcast
stations. Also in fiscal 2001 the Company plans to release approximately ten
(10) to twelve (12) motion pictures initially into the international
distribution market.
Technicolor Videocassette, Inc. currently serves as the Company's video cassette
duplicator and fulfillment contractor. Technicolor Videocassette, Inc. has a
general lien on all of the Company's materials and products in its possession.
The Company was authorized to spend up to $50,000 in fiscal 2000 to purchase
shares of its outstanding common stock in the open market or otherwise. The
amended debt covenant at March 27, 2000 increased the limit to the purchase of
outstanding common stock to
29
ITEM 7. (CONTINUED)
$750,000 per fiscal year. During fiscal year 2000, the Company purchased 8,100
shares at an average price of $5.6473 per share.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business", and "Market for the Registrants Common Equity and
Related Stockholder Matters" are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievement of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: Changes in public
tastes, industry trends and demographic changes, which may influence the
distribution and exhibition of films in certain areas; public reaction to and
acceptance of the Company's video, theatrical and television product, which will
impact the Company's revenues; competition, including competition from major
motion picture studios, which may affect the Company's ability to generate
revenues; reliance on management and key personnel; consolidation in the retail
video industry; whether the Company's current strategy which includes theatrical
releases of only specialized films and production and acquisition of made for
television product is successful; new methods of distributing motion pictures;
the timing or benefits of the Merger; and other factors referenced in this Form
10-K and the Company's other filings with the Securities and Exchange
Commission, including the September 8, 2000 proxy statement/prospectus relating
to the Merger.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not consider the potential loss of future earnings caused by
interest rate volatility to have a material impact on its financial position.
30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF TRIMARK HOLDINGS, INC.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) on page 76 present fairly, in all material respects,
the financial position of Trimark Holdings, Inc. and its subsidiaries at June
30, 2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 2000, in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14(a) on page 76 presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and the financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Century City, California
September 21, 2000
31
TRIMARK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
-----------------------------------------
(Dollars in Thousands, Except Share Data)
June 30, June 30,
ASSETS 2000 1999
------------ ------------
Cash and cash equivalents $ 2,314 $ 2,121
Accounts receivable, less allowances of
$7,282 and $5,352, respectively, and unearned
interest of $118,000 and $0, respectively (Note 2) 25,374 20,231
Film costs, net (Note 2) 42,703 49,230
Deferred marketing costs 1,031 1,518
Inventories, net (Note 2) 3,108 1,552
Investments (Note 2) 1,073 6,036
Property and equipment at cost, less accumulated
depreciation of $3,326 and $2,872, respectively (Note 2) 1,211 565
Due from officers 812 792
Other assets 979 1,233
------------ ------------
$ 78,605 $ 83,278
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving line of credit $ 34,000 $ 48,330
Accounts payable and accrued expenses 10,048 5,710
Minimum guarantees and royalties payable 11,923 12,204
Deferred income 594 889
Income taxes payable 591 64
------------ ------------
Total liabilities 57,156 67,197
------------ ------------
Commitments and contingencies (Note 10)
Minority interest 2,027 --
------------ ------------
Stockholders' equity:
Common stock, $.001 par value. Authorized
20,000,000 shares; 5,631,992 shares issued
at June 30, 2000 and 5,570,092 6 6
Shares issued at June 30, 1999
Additional paid in capital 18,899 18,617
Preferred stock, $.01 par value. Authorized
2,000,000 shares; no shares issued and
outstanding -- --
Retained earnings 4,531 (1,180)
Accumulated comprehensive income 494 3,101
Less treasury shares, at cost - 973,515 shares
and 965,415 shares (4,508) (4,463)
------------ ------------
Stockholders' equity 19,422 16,081
------------ ------------
$ 78,605 $ 83,278
============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
32
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Dollars in Thousands, Except Earnings/(Loss) Per Share)
Years Ended June 30,
------------------------------------------
2000 1999 1998
------------ ------------ ------------
Net revenues $ 95,534 $ 92,143 $ 80,150
Film costs and distribution expenses 75,625 81,188 67,089
------------ ------------ ------------
Gross profit 19,909 10,955 13,061
------------ ------------ ------------
Operating expenses:
Selling 7,055 7,209 7,461
General and administrative 7,044 5,465 5,100
Bad debt 343 (288) 1,109
------------ ------------ ------------
14,442 12,386 13,670
------------ ------------ ------------
Operating earnings (loss) 5,467 (1,431) (609)
Other (income) expenses:
Interest expense 2,639 3,849 4,443
Interest and investment income (3,026) (79) (172)
Minority interest (259) -- --
------------ ------------ ------------
(646) 3,770 4,271
------------ ------------ ------------
Earnings (loss) before income taxes 6,113 (5,201) (4,880)
Income taxes (Note 6) 402 (40) 299
------------ ------------ ------------
Net earnings (loss) $ 5,711 $ (5,161) $ (5,179)
------------ ------------ ------------
Weighted average number of common shares
basic (Note 2) 4,623 4,341 4,183
============ ============ ============
Net earnings (loss) per common share
basic (Note 2) $ 1.24 $ (1.19) $ (1.24)
============ ============ ============
Weighted average number of common shares
fully diluted (Note 2) 4,647 4,341 4,183
============ ============ ============
Net earnings (loss) per common share
fully diluted (Note 2) $ 1.23 $ (1.19) $ (1.24)
============ ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-------------------------------------
(Dollars in Thousands)
Common stock
-----------------------
Accumulated
Additional other Total
paid in comprehensive Retained Treasury stockholders'
Shares Amount capital income earnings stock equity
---------- ---------- ---------- ------------- ---------- ---------- ------------
Balance, June 30, 1997 4,146,881 5 15,474 -- 9,160 (4,430) 20,209
Exercise of stock options 35,746 -- 114 -- -- -- 114
Net loss -- -- -- -- (5,179) -- (5,179)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1998 4,182,627 5 15,588 -- 3,981 (4,430) 15,144
---------- ---------- ---------- ---------- ---------- ---------- ----------
Purchase of treasury stock (Note 8) (13,215) (33) (33)
Exercise of stock options 22,902 95 -- -- -- 95
Issuance of stock on equity
investment 412,363 1 2,934 -- -- -- 2,935
Net loss -- -- -- -- (5,161) -- (5,161)
Other comprehensive income, net
of tax -- -- -- 3,101 -- -- 3,101
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1999 4,604,677 $ 6 $ 18,617 $ 3,101 $ (1,180) $ (4,463) $ 16,081
---------- ---------- ---------- ---------- ---------- ---------- ----------
Purchase of treasury stock (Note 8) (8,100) -- -- -- -- (45) (45)
Exercise of stock options 61,900 -- 282 -- -- -- 282
Net earnings -- -- -- 5,711 -- 5,711
Other comprehensive income, net of tax -- -- -- (2,607) -- -- (2,607)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2000 4,658,477 $ 6 $ 18,899 $ 494 $ 4,531 $ (4,508) $ 19,422
---------- ---------- ---------- ---------- ---------- ---------- ----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
34
TRIMARK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Dollars in Thousands)
Years Ended June 30,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Operating activities:
Net earnings/(loss) $ 5,711 $ (5,161) $ (5,179)
Adjustments to reconcile net earnings/(loss) to
Net cash used by operating activities:
Film amortization 46,922 52,704 44,976
Depreciation and other amortization 454 439 384
Gain or sale of Yahoo!, Inc. shares (2,439) -- --
Provision for returns and bad debt 1,930 (653) 1,995
Provision for inventory obsolescence 789 (268) (11)
Minority interest (259) -- --
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (7,073) (3,010) 4,561
Additions to film costs (40,394) (36,870) (52,747)
Decrease (increase) in deferred marketing costs 487 445 (267)
Increase in inventories (2,345) (94) (529)
Increase in notes receivable from officers (20) (12) (118)
Decrease in other assets 254 522 570
Increase (decrease) in accounts payable and
accrued expenses 4,338 (2,350) 485
(Decrease) increase in minimum guarantees and
royalties payable (281) 4,581 4,231
Increase (decrease) in income taxes payable 527 21 (22)
Decrease in deferred income (295) (211) (183)
------------ ------------ ------------
Net cash provided (used) by operating activities 8,306 10,083 (1,854)
------------ ------------ ------------
Investing activities:
Acquisition of property and equipment (1,100) (263) (316)
Sale of equity investments 4,795 -- --
------------ ------------ ------------
Net cash provided (used) by investing activities 3,695 (263) (316)
------------ ------------ ------------
Financing activities:
Net decrease in revolving line of credit (14,330) (8,920) (450)
Exercise of stock options 282 95 114
Purchase of treasury stock (45) (33) --
Funds provided by minority shareholders 2,285 -- --
------------ ------------ ------------
Net cash used by financing activities (11,808) (8,858) (336)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents 193 962 (2,506)
Cash and cash equivalents at beginning of period 2,121 1,159 3,665
------------ ------------ ------------
Cash and cash equivalents at end of period $ 2,314 $ 2,121 $ 1,159
============ ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
35
TRIMARK HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
Trimark Holdings, Inc., a Delaware corporation (the "Company"), is a broad-based
entertainment company which distributes and licenses motion pictures in the
international and domestic arena through its wholly owned subsidiaries Trimark
Pictures, Inc. and Trimark Television, Inc. The significant business activities
of the Company constitute one business segment, filmed entertainment. The
Company is primarily engaged in the distribution of feature films for the
domestic home video market, domestic theatrical and television markets, and in
the licensing of distribution rights to motion pictures for foreign markets. As
an independent distribution company, the Company acquires distribution rights
from a wide variety of studios, production companies and independent producers.
36
NOTE 1. (CONTINUED)
Purple Tree Productions, Inc., Cheap Date, Inc., Loving Gun Productions, Inc.
and Writers on the Wave are wholly-owned subsidiaries of the Company, which were
formed for the sole purpose of producing motion pictures. Trimark Music, a
wholly-owned subsidiary of the Company, was formed for the purpose of exploiting
revenues from music rights owned by the Company.
CinemaNow, Inc., a majority owned subsidiary of the Company, was formed for the
purpose of streaming films over the internet using Trimark Pictures' library as
well as acquiring the internet rights of other films or film libraries.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
UNCLASSIFIED CONSOLIDATED BALANCE SHEET
In accordance with the provisions of Statement of Financial Accounting Standards
No. 53 ("SFAS 53"), the Company has elected to present an unclassified
consolidated balance sheet.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from these estimates.
NET REVENUES
Home video revenues are recognized, net of allowances for estimated returns, as
products are shipped to customers. Revenues from licenses of films to foreign
territories and domestic television are recognized when the films are made
available to sub-distributors and other terms of the license
37
NOTE 1. (CONTINUED)
agreements are satisfied. Revenues from theatrical distribution of films are
recognized when films are exhibited.
FILM COSTS
Film costs primarily represent capitalized theatrical print and advertising
expenditures and the acquisition of film rights from producers for a guaranteed
minimum payment, with the producer retaining a participation in the profits of
the property. The producer's share of the profits is retained by the Company
until it equals the amount of the guarantee, after which the excess is paid to
the producer. In these instances, the Company records as participation expense
an amount equal to the producer's share of the profits. The print and
advertising expenditures and guaranteed minimum payments are capitalized and
amortized using the individual-film-forecast-computation method in accordance
with SFAS 53.
FILM ACCOUNTING
In June 2000, The AcSEC issued SOP 00-2, Accounting by Producers or
Distributors of Films. The SOP supersedes current film accounting standards
related to the recognition of revenues, costs and film cost valuation and
must be adopted by companies for fiscal years beginning after December 15,
2000. The SOP requires that advertising costs for theatrical and television
product be expensed as incurred. Furthermore, revenue associated with the
home video market must be recognized upon availability to customers (street
date) and not the date the product is shipped. If the Company elects to adopt
SOP 00-2 as of July 1, 2000, the Company expects to incur a non-cash charge
of approximately $6.0 million on a pre-tax basis to reduce the carrying value
of film inventory, which would be reported as a cumulative effect of a change
in accounting principle.
CASH
Cash includes cash equivalents. The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. The carrying value of the Company's cash equivalents approximate
fair value due to their short nature.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts was increased by $342,000 for fiscal
2000, decreased by $293,000 for 1999, and increased by $1.1 million for 1998.
38
NOTE 2. (CONTINUED)
INVENTORIES
Inventories, net of an allowance for excess quantities and obsolescence, are
stated at the lower of cost or market using a first-in/first-out (FIFO) method
of accounting.
INVESTMENTS
Investments represent equity shares, which are available for sale and reported
at the market price as of June 30, 2000.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost net of depreciation. Depreciation of
property and equipment is computed using the straight-line method, based on
estimated useful lives of three to seven years. Web design costs included in
property and equipment are capitalized in accordance with SOP 98-1.
ROYALTIES PAYABLE
Payable to producers represents an accrual on a film-by-film basis of the
producers' share of revenues recognized by the Company net of the recoupable
costs incurred by the Company. The producers' share of revenue is expensed in
conjunction with the amortization of film costs.
INTEREST
Costs associated with the maintenance of debt are charged to expense and or
capitalized to the extent debt is used for productions.
NET INCOME/LOSS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share," ("SFAS 128") which
is effective for periods ended after December 15, 1997. The Company adopted SFAS
128 in fiscal year 1997. SFAS 128 replaces the presentation of primary and fully
diluted earnings per share with basic and diluted earnings per share.
Basic earnings and loss per common share amounts are based on the weighted
average number of common shares outstanding during the respective periods.
Dilutive earnings and loss per common share amounts are based on the weighted
average common shares outstanding during the period and shares assumed issued
upon conversion of stock options when the effect of such conversions
39
NOTE 2. (CONTINUED)
would have been dilutive to net earnings and loss. There is no assumed
conversion of stock options for fiscal 1999 and fiscal 1998 as the effect would
be anti-dilutive.
The table below presents a reconciliation of weighted average shares used in the
calculation of basic and diluted net earnings and loss per common share:
Years ended June 30,
------------------------------------------
2000 1999 1998
------------ ------------ ------------
(in thousands)
Basic shares -
weighted average of
common shares
outstanding 4,623 4,341 4,183
Additional shares
assuming
conversions of
stock options 24 -- --
------------ ------------ ------------
4,647 4,341 4,183
------------ ------------ ------------
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997.
The new rules establish standards for the reporting of comprehensive income
and its components in financial statements. Comprehensive income consists of
net income and other gains and losses affecting stockholder's equity that,
under generally accepted accounting principles, are excluded from net income,
such as unrealized gains and losses on investments available for sale. The
Company adopted SFAS 130 in fiscal 1999. The other comprehensive income
reported during the twelve month period ending June 30, 2000 is a result of
the realized and unrealized gain in Yahoo!, Inc. shares resulting from the
sale of the stock during the period. The other comprehensive income reported
at June 30, 2000 and June 30, 1999 resulted from the change in per share
price of Yahoo!, Inc. net of taxes of $10,000 and $63,000 at June 30, 2000
and June 30, 1999, respectively.
40
NOTE 2. (CONTINUED)
Years ended June 30,
---------------------------
2000 1999
------------ ------------
(in thousands)
Unrealized holding gains arising during period $ 256 $ 3,101
Less: Reclassification adjustment for gains included in net income (2,439) --
Reversal of unrealized gain (424) --
------------ ------------
Other comprehensive income, net of tax (2,607) 3,101
------------ ------------
Prior period accumulated comprehensive income 3,101 --
Accumulated comprehensive income year end $ 494 $ 3,101
============ ============
NOTE 3 - FILM COSTS:
Film costs, net of amortization, consist of the following:
June 30,
---------------------------
2000 1999
------------ ------------
(in thousands)
Released 35,297 36,352
Completed not released 2,982 3,938
In process and development 4,424 8,940
------------ ------------
$ 42,703 $ 49,230
------------ ------------
Based on the Company's estimate of future revenues as of June 30, 2000,
approximately 95% of unamortized released film costs will be amortized during
the next three years.
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
June 30,
---------------------------
2000 1999
------------ ------------
(in thousands)
Accounts payable $ 6,939 $ 3,953
Accrued marketing costs 2,179 1,562
Accrued other expenses 930 195
------------ ------------
$ 10,048 $ 5,710
------------ ------------
NOTE 5 - DEBT:
The Company's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., have a $75 million revolving credit facility with a
consortium of banks agented and arranged by The Chase Manhattan Bank expiring on
December 20,
41
NOTE 5. (CONTINUED)
2000. Under the credit agreement, the Company may borrow for various
corporate purposes provided that the aggregate borrowings do not exceed the
borrowing base, as defined in the Credit Agreement, which is derived from
specified percentages of approved accounts receivable and film library. The
credit agreement is guaranteed by the Company and secured by substantially
all of the assets of the Company and its significant subsidiaries. Loans
outstanding under the credit facility bear interest at the rate of 1.5% above
Chase Manhattan's prime rate (9.5% and 8% at June 30, 2000 and June 30, 1999,
respectively) or 2.5% above the London Interbank offered rate for the loan
term specified. An unused commitment fee is payable on the average unused
availability under the credit facility, at the rate of 0.3725% per annum. As
of June 30, 2000 there were $34 million outstanding under the bank facility.
The Credit Facility is collateralized by an interest in substantially all of
the Company's assets and contains various covenants including, among other
provisions, the maintenance of a minimum consolidated tangible net worth and
certain financial ratios. For the quarter ended December 31, 1997 the Company
was in violation of certain of these covenants, however the Banks granted a
waiver of these violations and amended the net worth covenant for the
duration of the Credit Facility. The Company also amended the Credit Facility
in December 1998, June 1999, March 2000, and June 2000 which provided for
less stringent minimum net worth ratios and reduced the minimum equity
requirement. In consideration for the amendments, the borrowing limits were
reduced to $60 million at March 31, 1999, $50 million at January 31, 2000,
and $45 million at June 30, 2000.
It is expected that the Company's current credit facility will terminate upon
the Merger with Lions Gate, and that the Company will become party to Lions
Gate's credit facility. In the absence of the Merger, the Company would need to
extend its existing credit facility or arrange alternative financing, as the
current credit facility expires in December 2000.
In connection with the credit facility, the Company has capitalized debt
issuance costs as other assets which are being amortized on a straight line
basis over the term of the agreement.
42
NOTE 6 - INCOME TAXES:
Consolidated income/(loss) before income taxes consists of the following:
Years ended June 30,
2000 1999 1998
------------ ------------ ------------
(in thousands)
Domestic $1,439 ($3,772) ($4,291)
Foreign 4,674 (1,429) (589)
------------ ------------ ------------
$6,113 ($5,201) ($4,880)
------------ ------------ ------------
The provision for income taxes is summarized as follows:
Years ended June 30,
2000 1999 1998
------------ ------------ ------------
(in thousands)
Current
Federal $ 379 $ (240) $ --
State 250 15 15
Foreign 82 185 284
------------ ------------ ------------
711 (40) 299
------------ ------------ ------------
Deferred
Federal (309) -- --
State -- -- --
------------ ------------ ------------
(309) -- --
------------ ------------ ------------
$ 402 $ (40) $ 299
------------ ------------ ------------
43
NOTE 6. (CONTINUED)
The components of the deferred tax assets and liabilities are summarized as
follows:
Years ended June 30,
----------------------------
2000 1999
------------ ------------
(in thousands)
Deferred Tax Assets:
Net operating loss carryforward $ 2,306 $ 9,403
Foreign tax credit carryforward -- 433
Reserves and allowances 2,226 1,249
Bad debts 882 1,009
Deferred income 236 399
State income taxes 80 8
AMT Credit 309 --
Investments 350 --
Other 225 256
------------ ------------
6,614 12,757
Deferred Tax Liabilities:
Film cost amortization (382) (5,214)
------------ ------------
Net deferred tax asset before
valuation allowance 6,232 7,543
Valuation allowance (5,923) (7,543)
------------ ------------
Net deferred tax asset $ 309 $ 0
------------ ------------
A reconciliation of the federal statutory tax rate to the Company's effective
tax rate is as follows:
Years ended June 30,
----------------------------------------------
2000 1999 1998
------------ ------------ ------------
Federal income tax rate 34.0% (34.0%) (34.0%)
State taxes, net of
federal income tax benefit (0.9%) 0.2% (0.2%)
Foreign taxes, net of
federal income tax benefit 0.9% 3.6% 5.8%
Meals and entertainment
Disallowance 0.6% 1.0% 1.0%
Income tax refund -- (4.6%) --
Valuation Allowance (26.5%) 32.7% 29.4%
Other (1.6%) 0.3% 3.8%
------------ ------------ ------------
6.5% (0.8%) 6.1%
------------ ------------ ------------
As of June 30, 2000 and June 30, 1999, the Company has a net deferred tax asset
balance of $309,000 and $0, an income taxes payable balance of $591,000 and
$64,000, and a taxes receivable balance of $240,000 and $240,000, respectively.
The utilization of net operating loss carryforwards in the current year has
generated a federal Alternative Minimum Tax ("AMT") liability of
44
NOTE 6. (CONTINUED)
approximately $309,000 that has been included in the current year income taxes
payable balance.
The net decrease of approximately $1.6 million in the valuation allowance is
primarily attributable to the reversal of reserves against the net operating
loss carryforwards ("NOL") that were utilized against current year book
income.
As a result of the acquisition of Trimark Television (formerly IBS) by the
Company, approximately $5.5 million in federal income tax NOL's were
acquired. The NOL's expire in the years 2004-2006. The Internal Revenue Code
of 1986, as amended, imposes substantial limitations on the use of NOL
carryforwards acquired in such an acquisition. Accordingly, a valuation
allowance has been established in prior years and the related balance at June
30, 2000 is approximately $2.1 million. For federal income tax purposes,
NOL's may be carried forward twenty (20) years, or until such time as they
are fully utilized. For California purposes, NOL's may be carried forward for
five (5) years or until such time as they are fully utilized.
NOTE 7 - MINORITY INTEREST:
In the first quarter of calendar year 2000, pursuant to the terms of a
Securities Purchase Agreement dated as of January 6, 2000, as amended, the
Company's majority-owned subsidiary, CinemaNow, Inc. ("CinemaNow"), completed a
private placement financing to accredited investors of 3,385,182 shares of
CinemaNow Series A Convertible Preferred Stock, yielding approximately
$2,285,000. In the event of a liquidation of CinemaNow, the holders of Series A
Preferred Stock shall be entitled to receive an amount per share equal to the
original Series A issue price plus any accrued but unpaid dividends on such
shares if the assets and funds of CinemaNow are sufficient to permit such
payment. At June 30, 2000, the minority interest balance attributable to
CinemaNow, net of the minority interest share of CinemaNow's losses was
$2,027,000.
45
NOTE 8 - STOCK OPTIONS:
Under the Company's stock option plans, employees and directors may be
granted nonqualified stock options ("options"). Generally, options are
exercisable contingent upon the grantee's continued employment with the
Company and generally have been granted with an exercise price equal to the
fair market value of the underlying Common Stock on the date of grant. Each
option is granted subject to various terms and conditions established on the
date of grant, including vesting periods and expiration dates. The options
typically become exercisable at the rate of 33.3% annually, beginning one
year after the date of grant. Options generally expire 10 years after the
date of grant. As of June 30, 2000 and 1999, a total of 945,092 and 979,369
options, respectively had been approved for issue under employee option plans
and other arrangements. As of June 30, 2000 and 1999, a total of 106,000 and
40,000 options, respectively had been approved for issue under the director
option plan. Stock option data follows:
2000 1999 1998
---------------------------- ----------------------------- ----------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------- ------------- -------------- ------------- ------------- -------------
Outstanding at July 1 567,723 $4.36 582,959 $5.28 691,809 $5.20
Granted 38,000 $3.80 175,000 $5.49 13,500 $5.22
Exercised (61,900) $3.00 (22,902) $4.44 (35,746) $3.20
Purchased (11,000) $3.00 -- -- (20,000) $4.09
Terminated -- -- (175,334) $5.72 (66,604) $5.95
------------- -------------- -------------
Outstanding at June 30 532,823 $4.50 567,723 $4.36 582,959 $5.28
============= ============== =============
Exercisable at June 30 405,048 $4.42 414,243 $4.24 441,408 $5.25
============= ============== =============
Available for grant at
June 30 269,322 268,599 272,265
============= ============== =============
During fiscal 2000, the Board authorized the purchase of 11,000 shares from a
former employee at a negotiated price.
During fiscal 1998, the Board authorized the purchase of 20,000 shares from a
former employee at a negotiated price.
46
NOTE 8. (CONTINUED)
The following table summarizes information concerning outstanding and
exercisable stock options at June 30, 2000:
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------
Weighted
Average
Remaining
Contractual Weighted Weighted
Range of Life Average Average
Exercise Number in Exercise Number Exercise
Prices of Shares Years Price of Shares Price
- ------------------------ ------------ ------------ ------------ ------------ ------------
$2.75 - $4.75 220,123 6.62 $ 3.56 154,113 $ 3.31
$5.00 - $6.25 312,700 6.52 $ 5.16 250,935 $ 5.10
------------ ------------ ------------ ------------ ------------
$2.75 - $6.25 532,823 6.56 $ 4.50 405,048 $ 4.42
============ ============ ============ ============ ============
The Company has adopted SFAS No. 123, "Accounting of Stock-Based Compensation,"
which establishes a fair value based method of accounting for compensation cost
related to stock option plans and other forms of stock-based compensation plans,
by providing the pro forma disclosures as if the fair value based method had
been applied for the current period and prior comparable period. In accordance
with SFAS No. 123, the Company applies the intrinsic value based method of
accounting defined under Accounting Principles Board Opinion No. 25 and
accordingly, does not recognize compensation expense for its plans.
Had compensation cost for the plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the method of FASB
Statement 123, the Company's pretax and after tax income would decrease by
$151,000 or $0.03 per share, $548,000 or $0.12 per share and $457,000 or $0.11
per share in fiscal 2000, fiscal 1999 and fiscal 1998, respectively. These pro
forma amounts may not be representative of future disclosures since the
estimated fair value of stock options is amortized to expense over the vesting
period, and additional options may be granted in future years.
The weighted average fair value of each option as of the grant date was $2.12,
$4.44 and $2.97 for fiscal 2000, fiscal 1999 and fiscal 1998, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
47
NOTE 8. (CONTINUED)
Fiscal 2000 fiscal 1999 fiscal 1998
------------ ------------ ------------
Expected dividend yield (a) -- -- --
Expected stock price volatility 81.00% 167.56% 78.45%
Risk-free interest rate 6.25% 5.82% 5.37%
Expected life of options (years) 4.05 6.20 5.48
(a) During fiscal 2000, 1999 and 1998, the Company did not declare any cash
dividends on its common stock. The Company does not have any present
intention to declare a dividend on its common stock in the foreseeable
future.
NOTE 9 - TREASURY STOCK:
On February 21, 1997, the Company announced a stock repurchase program pursuant
to which it could spend up to $1,500,000, $750,000 per fiscal year, to purchase
shares of its outstanding common stock in the open market through June 30, 1998.
The Company was authorized to spend $50,000 in fiscal 2000 which was increased
to $750,000 under the amended debt agreement. During fiscal 2000, the Company
spent $45,000 to purchase 8,100 shares and in fiscal 1999, the Company spent
$33,000 to purchase 13,215 shares under the repurchase program.
At June 30, 2000, the Company held 973,515 shares of treasury stock.
NOTE 10 - COMMITMENTS AND CONTINGENCIES:
The Company has entered into certain agreements which provide for guaranteed
royalty advances and promotional and advertising payments totaling $16.2
million. If the provisions of these agreements are not met by the licensors, the
Company may withdraw from the arrangements. These commitments extend to December
2001.
As of September 3, 1999 the Company entered into a 10 year operating lease. Rent
expense was $395,000,$479,000 and $433,000 for the years ended June 30, 2000 and
June 30,1999 and June 30,1998 respectively.
48
NOTE 10. (CONTINUED)
The future minimum rental commitments as of June 30, 2000 are as follows (in
thousands):
Year Ended
June 30,
--------------------------
2001 556,000
2002 574,000
2003 574,000
2004 577,000
Thereafter 3,677,000
--------------
$5,958,000
--------------
NOTE 11 - MAJOR CUSTOMERS:
For the years ended June 30, 2000, 1999, and 1998, Ingram and Blockbuster,
are the Company's major customers, accounted for 9%, 11% and 15% of net
revenues and 15%, 12% and 11% of net revenues, respectively. With regard to
foreign distribution net revenues, there are no individual geographic areas
that account for more than 10% of total net revenues.
In carrying out its film distribution activities, the Company grants credit to
customers, primarily all of whom are in the film distribution segment of the
entertainment industry. This customer base is sufficiently diversified by number
of customers, channels of distribution (theatrical exhibition, video
distribution, pay television, cable television and other) and geographic
location to prevent any undue risk related to concentration of credit.
NOTE 12 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Years ended June 30,
--------------------------------------------------------------
2000 1999 1998
---------------- ---------------- -----------------
(in thousands)
Interest $3,370 $4,387 $4,931
Income Taxes 352 179 323
Interest costs capitalized as film costs in fiscal 2000, fiscal 1999 and fiscal
1998 were $1,433,254, $1,203,224 and $1,031,000 respectively.
49
NOTE 13 - DUE FROM OFFICERS:
Notes receivable from officers are secured by Trimark Holdings stock which
equaled at least 200% of the outstanding loan amounts at the time the original
notes were executed. The loans bear interest at the Company's weighted average
cost of capital and interest is due quarterly. One loan was outstanding as of
June 30, 2000.
NOTE 14 - SUBSEQUENT EVENTS:
On June 6, 2000, the Company, Lions Gate Entertainment Corp., a British Columbia
corporation ("Lions Gate") and LGE Merger Sub Inc., a Delaware corporation and a
wholly owned subsidiary of Lions Gate ("Merger Sub"), executed an Agreement and
Plan of Merger (the "Merger Agreement") providing for the acquisition of the
Company by the form of a merger (the "Merger") of the Company with and into
Merger Sub, with Merger Sub surviving as a wholly owned subsidiary of Lions
Gate. In the Merger, each share of the common stock of the Company ("Common
Stock") will be exchanged for (i) US$4.50 in cash and (ii) two (2) shares,
without par value, of the common shares of Lions Gate (the "Lions Gate Common
Shares"); provided, however, that if the average of the last reported sale price
of Lions Gate Common Shares on the American Stock Exchange during the 30
consecutive trading days ending October 6, 2000 (the "Current Market Price") is
less than US$2.75 per share, then the number of Lions Gate Common Shares to be
issued for each share of Common Stock shall be the result obtained by dividing
US$5.50 by the Current Market Price. The consummation of the Merger is subject
to the approval of the Merger by holders of a majority of the Common Stock of
the Company and to certain other customary closing conditions. A special meeting
of the stockholders of the Company to vote on the Merger will be held on October
12, 2000. On September 26, 2000, the shareholders of Lions Gate approved the
Merger.
50
SCHEDULE II
TRIMARK HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
Balance Additions Additions Balance
at Beginning Charged to Charged to at End
Description of Period Expense Net Revenues Deductions of Period
----------- ------------- ------------- ------------- ------------- ----------
Provision for returns and
bad debts (1):
Year Ended June 30, 1998 $4,010 $1,109 $1,092 $ 206 (2) $6,005
Year Ended June 30, 1999 6,005 (288) 1,568 1,933 (2) 5,352
Year Ended June 30, 2000 5,352 343 1,945 358 (2) 7,282
Provision for inventory
obsolescence:
Year Ended June 30, 1998 326 -- -- (28) 298
Year Ended June 30, 1999 298 265 -- -- 563
Year Ended June 30, 2000 563 789 -- -- 1,352
- ---------------------------
(1) Returns are reflected in net revenues and bad debt expense is recorded
separately in the statement of operations.
(2) Doubtful receivables written-off, net of recoveries.
51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information, as of September 1, 2000,
with respect to each person who is a member of the Board of Directors of the
Company:
Year First Elected or
Positions with the Company and Appointed a
Name Principal Occupation for Past Five Years (1) Age Director
- ---- -------------------------------------------- --- --------
Mark Amin Chairman of the Board since November 1988, 50 1984(1)
and Chief Executive Officer since January
1994
Gordon Stulberg Former Chairman of the Board of Philips 76 1991
Interactive Media International (an
interactive compact disc development
venture of companies) and was Chairman of
the Board from 1986 to September 1993;
formerly, President of PolyGram Pictures;
and a consultant to Cox Enterprises since
1985
Matthew H. Saver Of Counsel to the law firm of Myman, Abell, 47 1994(1)
Fineman & Greenspan since 1994
52
ITEM 10. (CONTINUED)
Year First Elected or
Positions with the Company and Appointed a
Name Principal Occupation for Past Five Years (1) Age Director
- ---- -------------------------------------------- --- --------
Tofigh Shirazi Founder and president of Intercontinental 47 1994
United Investors Corporation (a
Houston-based real estate development and
investment firm) since 1981
Peter J. Dekom Management and business consultant and 53 1999
advisor since 1996; senior partner at the
law firm of Bloom, Dekom, Hergott and Cook
from 1973 to 1996
(1) Includes service both with the Company and Trimark Pictures, Inc., a
California corporation ("Trimark") and a wholly-owned subsidiary of the
Company.
All directors are elected annually and serve until the next annual meeting of
stockholders or until their successors are elected and qualified or until their
earlier resignation or removal. Directors of the Company who are not executive
officers are entitled to receive a fee of $10,000 per year for serving on the
Board of Directors, options to purchase 2,000 shares of Common Stock per year
under the 1999 Directors' Option Plan and $1,000 for attendance at each
committee meeting.
The following table sets forth the names, ages and all positions with the
Company currently held by each person who may be deemed an executive officer of
the Company. Executive officers serve at the discretion of the Board of
Directors. Except as otherwise indicated, each of the executive officers serves
in similar positions for both the Company and Trimark. Unless otherwise noted,
all references to the Company include Trimark:
Name Age Position
- ---- --- --------
Mark Amin 50 Chairman of the Board and Chief Executive Officer
Cami Winikoff 37 Chief Operating Officer of Trimark
Peter Block 37 Executive Vice President of Trimark
Sergei Yershov 34 Senior Vice President of Trimark
Jeff Gonzalez 32 Chief Financial Officer, Treasurer and Secretary
Andrew Reimer 43 Senior Vice President of Trimark
53
ITEM 10. (CONTINUED)
MARK AMIN is a founder of the Company and has served as its Chairman of the
Board since November 1988 and Chief Executive Officer since January 1994. Mr.
Amin served as a Director, President and Chief Executive Officer of the Company
from its incorporation in 1984 until December 1989. In 1981, Mr. Amin co-founded
20/20 Video, a video specialty store in Los Angeles, California, and served as a
director of 20/20 Video from 1981 until 1988. Mr. Amin sold his entire stock
interest in 20/20 Video in 1987. Mr. Amin graduated from the Graduate School of
Management at the University of California, Los Angeles with an MBA in marketing
in 1975, and was previously awarded a BA degree in economics by the University
of Kansas.
CAMI WINIKOFF joined Trimark in August 1990, in November 1991 was appointed
Director of Production, in January 1995 was appointed Vice President of
Production, in January 1997 was appointed Senior Vice President, in September
1997 was appointed Executive Vice President, Chief Administrative Officer and in
April 2000 was appointed Chief Operating Officer. Before joining Trimark Ms.
Winikoff was an independent producer.
PETER BLOCK joined Trimark in September 1993 and in February 1999 was appointed
Executive Vice President of Acquisitions, Distribution and New Media for
Trimark. Prior to joining Trimark, Mr. Block represented writers and producers,
worked for the WGA, and worked in the marketing and studio operations
departments at the Walt Disney Company. Mr. Block received his J.D. from USC,
MBA from the University of California, Los Angeles and B.A. from Duke
University.
SERGEI YERSHOV joined Trimark in January 1995 as Director of International
Sales, in January 1996 was appointed Vice President of International
Distribution and has served as Senior Vice President, International since August
1998. From November 1991 to June 1992 Mr. Yershov was Director of International
Sales for West Side Studios located in Los Angeles, California, and from July
1992 to December 1994 served as Vice President of International Distribution for
the same organization. Mr. Yershov graduated in 1988 from Military Aerospace
Academy, St. Petersburg with a major in Computer Science and Telecommunications.
JEFF GONZALEZ joined the Company in September 1998 as Chief Financial Officer
and Secretary. From 1994 until 1998, Mr. Gonzalez was Controller of Morgan Creek
Productions, Inc., a motion picture production company based in Burbank,
California. From 1991 until 1994, Mr. Gonzalez was a Senior Auditor at
54
ITEM 10. (CONTINUED)
PricewaterhouseCoopers LLP, a worldwide public accounting firm. Mr. Gonzalez
graduated in 1990 from the University of California, Los Angeles with a BA in
economics and is a certified public accountant (non-active).
ANDREW REIMER joined Trimark in April 1995 as the Vice President of Domestic
Television. In July 1997 he was appointed Senior Vice President of Worldwide
Television. Prior to joining Trimark, Mr. Reimer was one of the founders of, as
well as the senior programming executive at, Action Pay-Per-View. Mr. Reimer
also spent 6 1/2 years at Warner Bros. in various capacities, including Business
Affairs, Film Acquisition, and Strategic Planning. Mr. Reimer graduated from the
Graduate School of Management at the University of California, Los Angeles with
an MBA in marketing, and was previously awarded a BA degree in Music from the
State University of New York at Binghamton.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, its
executive (and certain other) officers, and any persons holding more than ten
percent of the Common Stock are required to report their ownership of the Common
Stock and any changes in that ownership to the Securities and Exchange
Commission ("Commission"). Specific due dates for these reports have been
established and the Company is required to report any failure to file by these
dates during the fiscal year July 1, 1999 through June 30, 2000. All of these
filing requirements were satisfied by its directors, officers and ten percent
holders, except that (i) Tofigh Shirazi, a director of the Company, filed late
one report on Form 4 relating to one transaction involving a purchase of Common
Stock; (ii) Andrew Reimer, a Senior Vice President of Trimark, filed late his
initial ownership report on Form 3; and (iii) Peter J. Dekom, a director of the
Company, filed late one report on Form 4 relating to a grant of stock options.
In making these statements, the Company has relied on the written
representations of its directors, officers and its ten percent holders and
copies of the reports that they have filed with the Commission.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation (including cash bonuses)
paid by the Company for its fiscal years ended June 30, 2000, 1999 and 1998 to
its Chief Executive Officer and
55
ITEM 11. (CONTINUED)
its four most highly compensated executive officers other than the Chief
Executive Officer at June 30, 2000.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation(1) Awards
---------------------- ----------------------
Securities
Underlying
Name and Options/ All Other
Principal Position Fiscal Year Salary($) Bonus($) Sars(#) Compensation($)(7)
------------------ ----------- --------- --------- ------- ------------------
Mark Amin 2000 $438,333 $169,860 --- $ ---
Chairman of the Board and 1999 $380,000 $ --- --- $ ---
Chief Executive Officer(2) 1998 $380,000 --- $ ---
Andrew Reimer 2000 $238,795 $ 86,347 --- $ ---
Senior V.P., Worldwide 1999 $127,049 $135,051 --- $ ---
Television of Trimark (3) 1998 $155,000 $ --- --- $ ---
Sergei Yershov, Senior V.P., 2000 $144,625 $ 67,431 --- $ ---
International Sales of 1999 $137,685 $ --- 10,000 $ ---
Trimark (4) 1998 $100,083 $ --- --- $ ---
Cami Winikoff 2000 $125,000 $150,045 --- $ ---
Chief Operating Officer 1999 $119,063 $ 90,000 85,000 $ ---
of Trimark(5) 1998 $107,048 $ 50,000 --- $ ---
Peter Block, Executive 2000 $175,000 $116,445 --- $ ---
V.P., Domestic 1999 $151,357 $ 20,500 85,000 $ ---
Distribution of Trimark(6) 1998 $119,792 $ --- --- $ ---
56
ITEM 11. (CONTINUED)
(1) The compensation described in this table does not include medical,
group life insurance or other benefits received by the named executive
officers which are available generally to all employees of the Company
and certain perquisites and other personal benefits received by the
named executive officers of the Company, the value of which did not
exceed the lesser of $50,000 or ten percent of the executive officer's
cash compensation in the table.
(2) Mr. Amin has been Chairman of the Board of the Company since November
1988 and Chief Executive Officer of the Company since January 15, 1994.
Mr. Amin is not operating under an employment agreement with the
Company, but see Item 13, Certain Relationships and Related Matters -
Agreements Relating to the Lions Gate Merger - Employment Agreement.
Effective December 1, 1999, Mr. Amin is being paid a salary at an
annual rate of $480,000.
(3) Trimark entered into a two-year employment agreement with Andrew Reimer
effective August 6, 1998. Mr. Reimer is entitled to receive an annual
base salary of $165,000 during the first year and $175,000 during the
second year of the agreement. The agreement provides that Mr. Reimer
will be eligible for a year-end bonus, for each year of the employment
term in which Trimark's "Video Revenue" and "Theatrical Revenue" (as
defined in the agreement) exceed certain levels. The agreement
generally provides that the aggregate of any bonus payments relating to
any applicable year will not exceed $90,000. If Mr. Reimer's employment
is terminated other than for reasons of cause, he will be entitled to
be paid the remaining balance of his salary and receive employee
benefits in accordance with their terms until such time as he shall
become employed in a job of equal or greater compensation.
(4) Trimark entered into a two-year employment agreement (which may be
extended by Trimark for an additional six-month period) with Sergei
Yershov effective January 16, 1999. Mr. Yershov is entitled to receive
an annual base salary of $125,000 during the first year and $135,000
during the second year of the agreement and $160,000 during the option
period. Mr. Yershov also received a one-time $10,000 signing bonus. The
agreement provides that Mr. Yershov will be eligible for a bonus for
the period of September 14, 1998 through the employment term in which
Trimark's "Foreign Revenue" (as defined in the agreement) exceeds
certain levels. The agreement provides that Mr. Yershov also will be
eligible for a post-employment bonus, for the
57
ITEM 11. (CONTINUED)
six month period following conclusion of his employment, if Trimark's
"Foreign Revenue" during such period exceeds certain levels. The
agreement provides that the aggregate of any bonus payments relating to
any applicable year will not exceed $60,000. If Mr. Yershov's
employment is terminated other than for reasons of cause, he will be
entitled to be paid 50% (75% in the event of a change of control of the
Company) of the remaining balance of his salary.
(5) Effective February 1, 1999, Trimark entered into an employment
agreement with Cami Winikoff for a two-year term commencing January 13,
2000. Ms. Winikoff was paid a signing bonus of $40,000 and is entitled
to an annual salary thereunder of $175,000. Effective March 23, 2000,
the term of the agreement was extended to January 13, 2003, and Ms.
Winikoff was paid a signing bonus of $32,000. If her employment is
terminated other than for breach, she will be entitled to be paid the
greater of (i) 50% of the remaining balance of her contract (100% in
the event of a change of control of the Company), plus vesting of all
unvested stock options to purchase 36,000 shares, or (ii) the
difference between $500,000 less the aggregate of the value of such
stock options plus the value of all other Company stock options held by
her at the date of the contract plus 50% (100% in the event of a change
of control of the Company) of the remaining balance of her salary under
the contract. In certain circumstances following a change of control,
Ms. Winikoff's base salary will increase to $250,000 and the foregoing
stock options shall vest.
(6) Trimark entered into a two-year employment agreement with Peter Block
effective February 1, 1999. Mr. Block is entitled to receive an annual
base salary of approximately $175,000 during the agreement, plus a
one-time $20,000 signing bonus and $40,000 in reimbursable expenses
during the term of the agreement. If his employment is terminated other
than for breach, he will be entitled to be paid the greater of (i) 50%
of the remaining balance of his contract (100% in the event of a change
of control of the Company), plus vesting of all unvested stock options
to purchase 70,000 shares that are scheduled to vest by June 1, 2001;
or (ii) the difference between $500,000 less the aggregate of the value
of such stock options plus the value of certain other Company stock
options held by him at the date of the contract plus 50% (100% in the
event of a change of control of the Company) of the remaining balance
of his salary under the contract. In certain circumstances
58
ITEM 11. (CONTINUED)
following a change of control, Mr. Block's base salary will increase to
$250,000 and the foregoing stock options to purchase 70,000 shares
shall vest.
(7) Represents cash contributions by the Company to its 401(k) Plan for the
account of the named individuals.
STOCK OPTIONS
The following table sets forth information with respect to grants of options
("Options") to purchase Common Stock under the Company's Stock Option and Stock
Appreciation Rights Plan to the executive officers named in the Summary
Compensation Table during the fiscal year ended June 30, 2000. The Company did
not grant any stock appreciation rights during such fiscal year.
OPTION GRANTS IN THE FISCAL YEAR ENDED JUNE 30, 2000
Potential realizable
value at assumed
annual rates of stock
price appreciation for
Individual grants option
-------------------------------------------------------- terms
---------------------
% of total options
granted to
employees in Exercise or
Options granted Fiscal base price Expiration
Name (#) Year ($/sh) date 5%($) 10%($)
---- --------------- ------------------ ----------- ---------- ----- ------
Mark Amin -- -- -- -- -- --
Andrew Reimer -- -- -- -- -- --
Sergei Yershov -- -- -- -- -- --
Cami Winikoff -- -- -- -- -- --
Peter Block -- -- -- -- -- --
59
ITEM 11. (CONTINUED)
The following table sets forth information with respect to the exercise of
Options, ownership of Options and Option values as of June 30, 2000. The Company
has no outstanding stock appreciation rights, either freestanding or in tandem
with Options.
AGGREGATED OPTION EXERCISES DURING FISCAL 2000
AND FISCAL YEAR END OPTION VALUES
Number of securities
underlying Value of unexercised
unexercised options at fiscal in-the-money options at fiscal
year end(#) year end ($)*
----------------------------- ------------------------------
Shares
acquired on Value
Name exercise(#) realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Mark Amin -- -- 200,000 -- $588,000 --
Andrew Reimer -- -- 5,000 -- $8,450 --
Sergei Yershov -- -- 6,500 3,500 $32,110 $17,290
Peter Block -- -- 38,500 52,500 $96,940 $128,100
Cami Winikoff -- -- 49,000 36,000 $242,060 $123,840
* Represents the difference between the closing price of the Common Stock
on June 30, 2000 ($7.94) and the exercise price of the Options,
multiplied by the applicable number of Options.
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
Since May 1990, the Company has maintained a Stock Option and Stock Appreciation
Rights Plan (the "1990 Plan"). The 1990 Plan provided for the grant of options
to purchase up to 820,000 shares of the Company's Common Stock to officers,
directors, key employees and consultants of the Company, and its subsidiaries.
As of May 21, 2000, no further options could be granted under the 1990 Plan. As
of June 30, 2000, 405,048 options were outstanding under the 1990 Plan. The 1990
Plan has terms substantially similar to the 1999 Stock Option Plan described
below.
Certain of the options granted under the 1990 Plan provide that such options
shall become fully exercisable upon a "change of control" of the Company. A
"change of control" is generally deemed to have occurred (i) upon approval by
the stockholders of the Company of a reorganization, merger or consolidation, in
each case, with respect to which persons who were the
60
ITEM 11. (CONTINUED)
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated corporation's then outstanding voting
securities; or (ii) upon the acquisition (other than from the Company) by any
person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the "Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 51% or
more of either the then outstanding shares or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors, but excluding, for this purpose, any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or related
trust) of the Company or its subsidiaries, or any corporation with respect to
which, following such acquisition, more than 50% of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by the individuals
and entities who were the beneficial owners of the voting securities of the
Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
then outstanding combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors. If the
stockholders of the Company approve the Merger with Lions Gate, this will
constitute a "change of control" under such option agreements. In addition, as
permitted under the Merger Agreement, all other options outstanding under the
1990 Plan will be accelerated in such event.
1999 STOCK OPTION PLAN
In October 1999, the Board of Directors of the Company adopted, subject to
stockholder approval which occurred on November 17, 1999, the 1999 Stock Option
Plan of Trimark Holdings, Inc. (the "1999 Plan"), and reserved 250,000 shares
for issuance under the 1999 Plan. The essential features of the 1999 Plan are
outlined below:
The 1999 Plan provides for the grant of options to officers, directors, key
employees and consultants of the Company and its subsidiaries. Approximately 90
of the Company's employees, directors and consultants (if any) are eligible to
participate in the 1999 Plan. The 1999 Plan is administered by an option
committee of the Board of Directors (the "Option Committee") comprised of
Messrs. Saver and Shirazi. The Board or Option
61
ITEM 11. (CONTINUED)
Committee has the authority to determine to whom, and the time or times at which
options will be granted, the number of shares of Common Stock that comprise each
option, whether to amend or reduce the exercise price of outstanding options,
and the time or times at which each option granted under the 1999 Plan may be
exercised; provided, however, that no option may be exercised later than 10
years after the date of grant. The maximum number of shares subject to options
that may be granted annually to any participant is 200,000. As of September 1,
2000, no options have been granted under the 1999 Plan.
The 1999 Plan provides for the grant of both "incentive stock options" or
"ISO's" and "non-qualified stock options" to acquire the Company's Common Stock.
ISO's may only be issued to the Company's employees and non-qualified stock
options may be issued to the Company's regular employees as well as its
consultants and certain of its executive officers and directors. ISO's must be
granted with an exercise price of no less than the fair market value of Common
Stock at the time of grant, but if granted to stockholders owning at least 10%
of the Common Stock outstanding, such options will be granted at a price of at
least 110% of the fair market value of such Common Stock at the time of grant.
The exercise price for non-qualified stock options is determined by the Option
Committee. The shares purchased upon the exercise of an option granted under the
1999 Plan are to be paid for: (i) in cash or by certified or cashier's check
payable to the order of the Company, (ii) by cancellation of indebtedness, (iii)
through the delivery of other shares of Common Stock having an aggregate fair
market value equal to the total exercise price of the option being exercised,
(iv) with the approval of the Option Committee, by a promissory note made by the
optionee in favor of the Company upon terms and conditions to be determined by
the Option Committee and secured by the shares issuable upon exercise of such
option, or (v) any combination thereof. Options granted by the Board or Option
Committee may provide that such options shall become fully exercisable upon a
"change of control" of the Company in circumstances to be delineated by the
Board or Option Committee.
Consideration for the options to be granted under the Plan is provided by the
recipient's past, present and expected future contributions to the Company. No
monetary consideration is provided by the recipient with respect to the grant of
options.
Except as otherwise provided by the Board or Option Committee as to
non-qualified options, no option granted under the 1999 Plan is transferable,
except in the event of a recipient's death or permanent disability. ISO's may be
exercised by the holder (a) while he is an employee of the Company or (b) at
such time as
62
ITEM 11. (CONTINUED)
designated in the individual option agreement but in no event later
than three months after termination of his employment, other than owing to death
or permanent disability. In the event of a recipient's death or permanent
disability, the recipient's ISO's may be exercised at any time prior to
expiration of the ISO's, but in any event no later than one year after the date
of his death or permanent disability. In the event of the recipient's death, the
ISO's may be exercised by the person entitled to do so under the recipient's
will or by the recipient's legal representative. Termination of employment or
other relationship with the Company by a holder of non-qualified stock options
will have the effect specified in the individual option agreement. The 1999 Plan
is not subject to the Employee Retirement Income Security Act of 1974. The 1999
Plan is not qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended.
The Board of Directors or the Option Committee may at any time suspend or
terminate the 1999 Plan except that (i) no such action may impair the rights of
optionees under any option previously granted pursuant to the 1999 Plan and (ii)
shareholder approval is required to effect any amendment to or change in the
1999 Plan that would: (a) increase the maximum number of shares which may be
acquired pursuant to options granted under the 1999 Plan (except as to
adjustments for stock splits through a reorganization, recapitalization, stock
dividend, stock split, reverse stock split or other similar transaction as
provided in the 1999 Plan); (b) change the minimum exercise price of an option;
(c) increase the maximum number of options issuable under the 1999 Plan; or (d)
change the designation of persons eligible to receive options under the 1999
Plan.
1999 DIRECTORS' OPTION PLAN
In January 1999, the Board of Directors of the Company adopted, subject to
stockholder approval which occurred on November 17, 1999, the Company's 1999
Directors' Option Plan (the "1999 Directors' Plan") which authorizes the
issuance of up to 106,000 shares of Common Stock to non-employee directors of
the Company (currently four persons). The essential features of the 1999
Directors' Plan are outlined below:
The purposes of the 1999 Directors' Plan are to enable the Company to attract
and retain the services of non-employee members of the Board and to provide them
with increased motivation and incentive to exert their best efforts on behalf of
the Company by enlarging their personal stake in the Company. The 1999
Directors' Plan covers an aggregate of 106,000 shares
63
ITEM 11. (CONTINUED)
of Common Stock and no options may be granted after January 8, 2008.
The 1999 Directors' Plan provides that each non-employee director as of
January 8, 1999 ("Effective Date") would receive an option to purchase 2,000
shares of Common Stock at an exercise price equal to the fair market value as
of such date ($3.00). Furthermore, on the Effective Date, Messrs. Stulberg,
Saver and Shirazi received a one-time grant to purchase 10,000, 8,000 and
8,000 shares of Common Stock, respectively, at an exercise price of $3.00. In
addition, any person who is a non-employee director on an annual anniversary
date of the Effective Date (including and terminating with the anniversary
date in the year 2008) will receive an option to purchase 2,000 shares at the
fair market value on that date, subject to the overall limit of the number of
shares issuable under the 1999 Directors' Plan. The maximum term of each such
option is ten years from the date the option is granted. Each option vests
fully upon the date of grant. The options are nontransferable, except by will
or the laws of descent and distribution and must be exercised by the optionee
during the optionee's lifetime only by such optionee except that the
optionee's estate may exercise the option immediately within one year of the
optionee's death. Any outstanding option may be exercised within one year by
an optionee who ceases to be a director by reason of disability. In the event
an optionee ceases to be a director otherwise than by reason of death or
disability, any outstanding option held by such optionee will terminate. The
Board of Directors may suspend, discontinue, modify or amend the 1999
Directors' Plan in any respect except that the Board may not suspend,
discontinue, modify or amend the 1999 Directors' Plan so as to adversely
affect the rights of a participant with respect to any grants that have
previously been made to such participant without such participant's approval.
In addition, no amendment to or modification of the 1999 Directors' Plan
which: (i) materially increases the benefits accruing to participants; (ii)
except for certain changes in capital stock as a result of stock splits or
other comparable transactions as set forth in the 1999 Directors' Plan,
increases the number of shares that may be issued under the 1999 Directors'
Plan; or (iii) modifies the requirements as to eligibility for participation
under the 1999 Directors' Plan, will be effective without stockholder
approval.
On January 8, 2000, each of Messrs. Stulberg, Saver, Shirazi and Dekom received
a grant to purchase 2,000 shares at $3.5625 per
64
ITEM 11. (CONTINUED)
share. The 1999 Directors' Plan is not subject to ERISA and is not qualified
under Section 401(a) of the Code.
401(k) PLAN
Effective as of January 1, 1990, the Company adopted its 401(k) Plan (the
"Plan"), which includes a cash-or-deferred arrangement under Section 401(k) of
the Internal Revenue Code of 1986, as amended. The Plan, which has been amended
and restated as of July 1, 1997, was established to provide retirement and other
benefits to employees of the Company. Employees who have completed at least 6
months of service qualify for the Plan. Participants may designate up to 15% of
their compensation to be contributed to the Plan on a pre-tax basis ("Employee
Elective Contributions"). Participants will be 100% vested in their Employee
Elective Contributions (including earnings) at all times.
The Company does not make matching contributions to the Plan. The Company may
determine each plan year to make discretionary profit sharing contributions on
behalf of participants who meet certain eligibility requirements (i.e. employed
on the last day of the plan year or completion of at least 500 hours of service
during such year). Participants will generally vest in the Company's
contributions (including earnings) at the rate of 40% after the first year of
service, 60% after the second year of service, 80% after the third year of
service and 100% after the fourth year of service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Gordon Stulberg, Matthew H. Saver
and Tofigh Shirazi. The members of the Stock Option and Stock Appreciation
Rights Plan Committee are Matthew H. Saver and Tofigh Shirazi. Messrs. Stulberg,
Saver and Shirazi are directors of the Company. No member of the Compensation
Committee or Stock Option and Stock Appreciation Rights Plan Committee has any
interlocking relationship with any other corporation that requires disclosure
under this heading.
65
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 31, 2000, information relating to
beneficial ownership (within the meaning of SEC Rule 13d-3) of Common Stock by
the Company's directors and executive officers and owners of more than 5% of any
class of the Company's voting securities who are known to the Company. Except as
otherwise specified, the named beneficial owner claims sole investment power and
voting power as to the securities reflected in the table. The options held by
the individuals identified below are either currently exercisable or will become
exercisable upon approval of the Merger by the Company's stockholders.
SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS
- ------------------------------------ ------------------ -------------------
Mark Amin (1) 1,755,375 (2) 35.3%
Gordon Stulberg 19,800 (3) *
Matthew H. Saver 13,000 (4) *
Tofigh Shirazi 44,762 (5) *
Peter J. Dekom 2,000 (6) *
Sergei Yershov 10,000 (7) *
Jeff Gonzalez 12,500 (8) *
Cami Winikoff 18,000 (9) *
Peter Block 91,000 (10) 1.9%
Andrew Reimer 5,000 (11) *
Reza Amin (1)(12) 571,316 (13) 12.0%
Yahoo! Broadcast Services (14) 412,363 (15) 8.7%
Directors and executive officers
as a group (10 persons) 1,971,437 (16) 38.3%
* Represents less than 1% of the 4,764,300 shares of Common Stock outstanding
on August 31, 2000.
66
ITEM 12. (CONTINUED)
(1) Mark Amin and Reza Amin are brothers.
(2) Mark Amin disclaims beneficial ownership of 66,390 of these shares,
which he holds as trustee of a trust for the benefit of certain family
members. Includes options to purchase 200,000 shares.
(3) Includes options to purchase 18,000 shares.
(4) Includes options to purchase 12,000 shares.
(5) Includes 32,000 shares held by a family limited partnership and options
to purchase 12,000 shares.
(6) Includes options to purchase 2,000 shares.
(7) Includes options to purchase 10,000 shares.
(8) Includes options to purchase 12,500 shares.
(9) Includes options to purchase 18,000 shares.
(10) Includes options to purchase 91,000 shares.
(11) Includes options to purchase 5,000 shares.
(12) The address of Reza Amin is c/o the Company, 4553 Glencoe Avenue, Suite
200, Marina del Rey, California, 90292.
(13) Reza Amin disclaims beneficial ownership of 132,780 of these shares
which he holds as trustee of a trust for the benefit of certain family
members.
(14) The address of Yahoo! Broadcast Services (formerly known as
broadcast.com.inc.) is 2914 Taylor Street, Dallas, Texas 75226.
(15) As of March 29, 1999, as reported in Schedule 13G.
(16) Includes options to purchase 380,500 shares.
67
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED MATTERS
LOANS
During the fiscal year ended June 30, 1997, Trimark made a loan of $400,000 to
Mark Amin, the Chairman of the Board and Chief Executive Officer of the Company.
In July 1997, Trimark loaned an additional $350,000 to Mr. Amin. Mr. Amin's loan
is evidenced by a promissory note, is secured by shares of the Company's Common
Stock and bears interest at Trimark's weighted average cost of funds under its
credit facility with its bank (which averaged 8.24% during the fiscal year ended
June 30, 2000), but in no event less than the applicable federal rate set forth
in Section 1274(d) of the Internal Revenue Code. Interest payments were due
quarterly until June 30, 2000, at which time the entire loan balance was to be
due. The largest aggregate amount of indebtedness outstanding during the fiscal
year ended June 30, 2000 was $811,892. As of September 1, 2000, the aggregate
amount outstanding was $ 823,709. In connection with Mr. Amin's employment
agreement with Lions Gate dated as of June 6, 2000, as a bonus in respect of
entering into such agreement and Mr. Amin's efforts on behalf of CinemaNow,
Inc., upon closing of the Merger, the loan, together with all accrued but unpaid
interest, will be forgiven.
YAHOO! BROADCAST SERVICES
On March 29, 1999, pursuant to the terms of a February 22, 1999 agreement
between the Company and broadcast.com inc. (now known as Yahoo! Broadcast
Services) ("BCST")to jointly market certain of the Company's movies by streaming
them on the BCST web site, the Company issued and sold to BCST 412,363 shares of
the Company's Common Stock (or 9% of its outstanding shares) in exchange for
45,858 shares of common stock of BCST. As a result of this business venture, the
Company and BCST will work together to distribute movies on the internet under a
variety of new revenue models including pay-per-view, electronic commerce,
integrated advertising, personalized marketing and user interactive content.
Under this agreement, which terminates on January 31, 2001 unless extended, the
Company will use its best efforts on future titles to give BCST streaming rights
or in certain circumstances rights of first refusal in connection therewith.
68
ITEM 13. (CONTINUED)
EMPLOYMENT AGREEMENTS
Reference is made to the "Summary Compensation Table" for a description of
employment arrangements and other arrangements between the Company and certain
of its directors and officers.
CINEMANOW, INC.
In the first quarter of calendar year 2000, pursuant to the terms of a
Securities Purchase Agreement dated as of January 6, 2000, as amended, the
Company's majority-owned subsidiary, CinemaNow, Inc. ("CinemaNow"), completed a
private placement financing to accredited investors of 3,385,182 shares of
CinemaNow Series A Convertible Preferred Stock, yielding proceeds of
approximately $2,285,000. The investors, CinemaNow and the Company are parties
to an Investors Rights Agreement and to a Co-Sale Agreement pursuant to which
the investors are granted certain registration rights, board representation
rights and rights of first opportunity relating to CinemaNow and future equity
offerings by it, and the founders of CinemaNow (who include the Company) grant
the investors, subject to certain exceptions, the right to participate in sales
by the founders and the right of first opportunity with respect to future sales
of CinemaNow stock held by the founders. In connection with the foregoing
transactions, CinemaNow has issued to Trimark a $215,000 convertible
subordinated debenture due June 30, 2001 relating to debt CinemaNow owes
Trimark. CinemaNow and Trimark are also parties to a five-year exclusive output
agreement (except with respect to an existing agreement between Trimark and a
third party) with respect to the Internet rights to all of Trimark's motion
pictures in the U.S. and Canada to the extent Trimark controls such rights.
Under CinemaNow's stock option plan, Mark Amin, Chairman of the Board and Chief
Executive Officer of the Company and Chairman of the Board of CinemaNow, was
granted stock options at varying exercise prices (each in excess of the fair
market value on the grant date) and vesting over a three-year term, to acquire
up to 2,100,000 shares of CinemaNow common stock, or approximately 9% of such
common stock on a fully-diluted basis. Cami Winikoff, Chief Operating Officer of
Trimark and a director of CinemaNow, was granted stock options at the fair
market value on the grant date and vesting over a three-year term to acquire
15,000 shares of CinemaNow common stock. Jon Feltheimer, Vice Chairman and Chief
Executive Officer of Lions Gate, and Michael Burns, Vice Chairman of Lions Gate,
each hold convertible preferred stock and options to purchase common stock of
CinemaNow and have served on its board of directors since February 2000. Each of
69
ITEM 13. (CONTINUED)
Mr. Feltheimer and Mr. Burns owns approximately 2% of the outstanding
convertible preferred stock, and the options they own, which vest over three
years commencing March 1 2000, are exercisable for less than 1% of the common
stock of CinemaNow.
AGREEMENTS RELATING TO THE LIONS GATE MERGER
The following agreements relate to the Merger:
TRIMARK STOCKHOLDERS VOTING AGREEMENT
As an inducement and condition to Lions Gate's entering the Merger Agreement,
Mark Amin, Chairman and Chief Executive Officer of the Company, Reza Amin, and
Lions Gate entered the Trimark Stockholders Voting Agreement, dated June 6,
2000. Mark Amin and Reza Amin beneficially own or hold of record, in the
aggregate, approximately 45% of the outstanding Common Stock. Mr. Amin entered
the agreement solely in his capacity as a Company stockholder and not in the
capacity as director of the Company.
Under the agreement, Mark Amin and Reza Amin agreed to vote at the Company
stockholders' meeting their Common Stock beneficially owned or held of record by
them in favor of the Merger Agreement and the transactions contemplated by the
Merger Agreement, and against, except as permitted by the Merger Agreement, any
competing or alternative proposal. Mark Amin and Reza Amin further agreed not to
enter any written agreement with any third party the effect of which would be
inconsistent with the Merger Agreement.
Subject to certain permitted exceptions as set forth in the agreement, Mark Amin
and Reza Amin agreed that they will NOT:
- Solicit, or facilitate any inquiries or the making of any proposal
that is, or may reasonably be expected to lead to, an alternative
acquisition proposal, nor will they permit any of their agents to
do so;
- Offer for sale, sell, encumber, or otherwise dispose of, their
Common Stock;
- Grant any proxy or power of attorney with respect to the matters
in the agreement;
- Deposit any of their Common Stock in a voting trust or enter a
voting agreement with respect to the matters in the agreement.
70
ITEM 13. (CONTINUED)
The agreement will terminate upon the earliest to occur of:
- The effective time of the Merger;
- The exercise of the rights of Trimark's board and Trimark with
respect to receipt of an offer from a third party
- The termination of the Merger Agreement in accordance with its
terms.
REGISTRATION RIGHTS AGREEMENT
Simultaneously with the execution of the Merger Agreement, Mark Amin and Reza
Amin entered a registration rights agreement with Lions Gate that will take
effect upon the completion of the Merger. The agreement provides for demand
rights and "piggyback" rights with respect to the registration under the
Securities Act of 1933 of the shares of Lions Gate common stock to be received
by each of them in the Merger and with respect to the shares of Lions Gate
common stock issuable upon the exercise of options granted by Lions Gate to Mark
Amin under his employment agreement with Lions Gate.
The demand rights entitle Mark Amin and Reza Amin to require, on two occasions
any time after 180 days from the effective time of the Merger, that Lions Gate
use its commercially reasonable best efforts to register the shares of Lions
Gate common stock then owned by them, for public resale, so long as Mark Amin
and Reza Amin are demanding registration of at least 25% of the shares of Lions
Gate common stock received by Mark Amin in connection with the Merger.
The piggyback rights entitle Mark Amin and Reza Amin to require, at any time
after the effective time of the Merger, that Lions Gate include their shares of
Lions Gate common stock in other registration statements filed by Lions Gate for
shares that Lions Gate wishes to sell.
Mark Amin's and Reza Amin's demand rights and piggyback rights are subject to
the ability of the underwriters, if any, to limit the number of shares included
in the registration statement, and other customary conditions.
Lions Gate will bear all expenses of these registration statements, except for
fees and expenses of counsel for Mark Amin and Reza Amin, stock transfer fees
and underwriters' discounts, commissions and fees, if any.
71
ITEM 13. (CONTINUED)
Lions Gate has agreed not to enter into any agreement with respect to its
securities that is inconsistent with or violates the rights granted to Mark Amin
and Reza Amin under the agreement, and further agreed to grant to Mark Amin and
Reza Amin any more favorable rights that Lions Gate may grant to others in the
future with respect to registration of its securities.
Mark Amin agreed, subject to specified conditions during the six-month period
beginning upon the effective time of the Merger, to neither sell the shares of
Lions Gate common stock that he acquires in the Merger nor exercise his
piggyback rights.
The agreement also contains other customary provisions, such as indemnification
undertakings by Lions Gate, Mark Amin and Reza Amin in connection with
registration statements filed under the agreement.
The demand rights and piggyback rights of Mark Amin and Reza Amin under the
agreement may expire as early as two years after the effective time of the
Merger, if the shares of Lions Gate common stock then owned by them are eligible
for sale pursuant to Rule 144 under the Securities Act of 1933, but will
terminate in any event five years after the effective date of the Merger.
EMPLOYMENT AGREEMENT
Mark Amin has entered a three-year employment agreement with Lions Gate. Under
the agreement, which is contingent upon the completion of the Merger, Mr. Amin
will provide high-level advisory and consulting services to the home video
operations of Lions Gate and the Company. Mr. Amin will hold the title of Vice
Chairman and will also have the right to serve as a director of Lions Gate. In
addition, he will remain Chairman of CinemaNow, Inc., a majority-owned
subsidiary of the Company, for so long as CinemaNow remains under Lions Gate's
control. Mr. Amin will not, however, be an officer of Lions Gate.
As compensation, Mr. Amin will receive an annual salary of no less than
U.S.$500,000, fully vested options to purchase one million shares of Lions Gate
common stock at a price of U.S.$2.55 per share and an additional 400,000 shares
at a price of U.S.$4.00 per share and forgiveness of indebtedness to the Company
in the amount of approximately U.S.$795,000. Of the total options granted to Mr.
Amin, options to purchase 125,000 shares of Lions Gate common stock shall be
immediately exercisable on the date of consummation of the Merger; one-third
72
ITEM 13. (CONTINUED)
of the balance shall become vested in equal installments on each of the first,
second and third anniversaries of the employment agreement provided that options
to acquire 637,500 shares shall not become exercisable unless the average
closing price of the Lions Gate common stock for a period of 20 consecutive
trading days is not less than U.S. $4.00 and the remaining options will not
become exercisable until the average stock price is not less than U.S. $6.00.
Mr. Amin is entitled to allocate some of the options to Company employees. In
the event any payments to Mr. Amin become subject to the "golden parachute"
excise tax provisions of the Internal Revenue Code, Mr. Amin will also be
entitled to an excise tax "gross-up" in an amount sufficient to offset fully the
effects of the excise tax.
In general, during the four year period following the effective time of the
Merger, Mr. Amin will not be permitted to engage in enterprises that compete
with Lions Gate in the business of United States and/or foreign theatrical or
home video distribution of theatrical or home video motion pictures, in each
case for so long as Lions Gate remains materially engaged in these businesses.
However, Mr. Amin will be permitted to engage in the development,
pre-production, financing, production or distribution of motion pictures. In
addition, if Mr. Amin is no longer serving on Lions Gate's board, he will be
permitted to serve in an executive or other capacity with competitors of Lions
Gate, so long as his duties do not directly involve the areas of theatrical and
home video distribution of theatrical or home video motion pictures. To the
extent consistent with his non-compete obligations, Mr. Amin will be permitted
to engage in outside employment, consulting, business, charitable and/or
investment activities, and he will not be required to dedicate such number of
hours to the performance of his duties to Lions Gate as would materially
interfere with his taking on substantial daily responsibilities unrelated to his
employment with Lions Gate.
In general, while Mr. Amin is employed by Lions Gate, Lions Gate will have a
right of first refusal with respect to worldwide distribution rights in any
motion picture produced by Mr. Amin (other than as a producer for hire) to the
extent Mr. Amin controls the licensing of the distribution rights. Exceptions to
the right of first refusal apply to motion pictures whose distribution rights
Mr. Amin does not control, and six projects which Mr. Amin brought to the
Company prior to the Merger and as to which he will reimburse the Company for
its sunk development costs, upon completion of the Merger or commencement of
principal photography of each project, as provided in the employment agreement.
73
ITEM 13. (CONTINUED)
If Lions Gate terminates Mr. Amin's employment without cause or materially
breaches the employment agreement, Mr. Amin will be entitled to receive a lump
sum equal to the balance of the compensation due under the employment agreement,
with a minimum of 12 months compensation. In such event, Mr. Amin's obligations
under the non-competition and right of first refusal provisions of the
employment agreement will immediately terminate, as well as his obligations
under the "stand-off" provisions of the registration rights agreement.
To enforce his rights to serve on Lions Gate's board, Lions Gate is required to
issue to Mr. Amin all of the issued and outstanding shares of a new class of
preferred stock to be issued by Lions Gate, subject to approval of its
stockholders. Such approval has been obtained.
10 shares will be authorized and issued to Mr. Amin at a price of U.S.$10 per
share, and the terms of the Series B Preferred Shares will be as follows:
Holders of the Series B Preferred Shares, exclusively and separately as
a class, will be entitled to elect one director of Lions Gate, who will
be Mark Amin.
The Series B Preferred Shares will bear no dividend rights.
In the event of the liquidation, dissolution or winding up of Lions Gate,
whether voluntary or involuntary, or any other distribution of the assets of
Lions Gate among its members for the purposes of winding up its affairs, holders
of the Series B Preferred Shares will have a liquidation preference of U.S.$10
per share.
Lions Gate may redeem all of the Series B Preferred Shares at a price of
US$10.00 per share,
- If, at any time after the third anniversary of the first issuance
of any Series B Preferred Shares, the holders of Series B
Preferred Shares and their controlled affiliates, family members,
and trusts over which such persons maintain sole voting power own,
as a group, fewer than 2,000,000 shares of Lions Gate common
stock; or
- If at any time Lions Gate or its stockholders shall be a party to
any transaction, including without limitation, any amalgamation,
arrangement, takeover bid, issuer bid, consolidation or merger
that results in the holders of Lions Gate common stock immediately
prior to the effective date of such transaction (calculated on a
pro
74
ITEM 13. (CONTINUED)
forma basis, including the common stock issuable upon the
conversion of all outstanding Series A Preferred Shares) holding,
in the aggregate, less than 50% of the corporation or entity
surviving the transaction, or any sale of all or substantially all
of Lions Gate's assets.
75
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements included in Part II of this report:
Page
-------------------
Report of Independent Accountants 31
Consolidated Balance Sheets at June 30, 2000 and 1999 32
For the years ended June 30, 2000, 1999 and 1998:
Consolidated Statements of Operations 33
Consolidated Statements of Stockholders' Equity 34
Consolidated Statements of Cash Flows 35
Notes to Consolidated Financial Statements 36-50
Financial Statement Schedules:
II. Valuation and Qualifying Accounts 51
All other schedules have been omitted either as inapplicable or not required
under the instructions contained in Regulation S-X or because the information is
included in the financial statements or the notes thereto.
(b) Reports on Form 8-K:
On June 16, 2000 the Company filed a Current Report on Form 8-K, dated June 6,
2000, under Item 1, regarding the Merger with Lions Gate.
(c) Exhibits:
(i) Except as noted, all Exhibits, numbered as they were numbered for filing as
Exhibits to the Company's Form S-1 Registration Statement, No. 33-35053,
effective June 26, 1990, are incorporated herein by this reference to such
Registration Statements. All filings were made at the Commission's office in
Washington D.C. The registrant's SEC file number is 0-18613:
76
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger dated June 6, 2000 among Lions Gate Entertainment Corp., LGE
Merger Sub, Inc. and the Registrant. 23
2.2 Lions Gate Stockholders Voting Agreement dated June 6, 2000 by and between the Registrant
and Frank Giustra. 23
2.3 Trimark's Stockholders Voting Agreement dated June 6, 2000 by and among Lions Gate
Entertainment Corp., Mark Amin and Reza Amin. 23
2.4 Registration Rights Agreement dated as of June 6, 2000 by and among Lions Gate
Entertainment Corp., Mark Amin and Reza Amin. 23
2.5 Employment Agreement dated as of June 6, 2000 between Lions Gate Entertainment Corp. and
Mark Amin. 23+
3.1 Certificate of Incorporation of the Registrant, as amended to date. 4
3.2 By-laws of the Registrant, as amended. 8
4.2 Form of Common Stock Certificate. 4
10.2 Stock Purchase and Option Agreement, dated as of September 1, 1987, as amended, by and
between Vidmark, Inc., a California corporation and Said (Sam) Pirnazar. +
10.4 Stock Purchase and Option Agreement, dated as of September 1, 1989, by and between
Vidmark, Inc., a California corporation and Said (Sam) Pirnazar. +
10.13 1990 Stock Option and Stock Appreciation Rights Plan of the Registrant, as amended. 13+
10.15 Amendment to Stock Option Agreements, dated as of May 17, 1990, by and among the
Registrant, Vidmark, Inc., a California corporation and Said (Sam) Pirnazar. +
77
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.22 Standard Office Lease - Gross, dated as of March 9, 1992, and amendments thereto, by and
between Vidmark, Inc., a California corporation and 2644 SM Partners, a California
limited partnership. 4
10.25 Non-Qualified Stock Option Agreement dated December 5, 1991, by and between the
Registrant and Gordon Stulberg. 4+
10.29 Non-Qualified Stock Option Agreement dated December 2, 1992, by and between the
Registrant and Gordon Stulberg. 5+
10.32 Directors' Stock Option Plan of the Registrant. 13+
10.35 Technicolor Videocassette, Inc. Fulfillment Agreement with Trimark Pictures, Inc. dated
as of March 1, 1994, by and between Trimark Pictures, Inc., a California corporation and
Technicolor Videocassette, Inc. 7
10.41 Non-Qualified Stock Option Agreement dated March 31, 1994, by and between the Registrant
and Timothy Swain. 8+
10.43 Non-Qualified Stock Option Certificate dated January 14, 1994, by and between the
Registrant and Gordon Stulberg. 8+
10.45 Non-Qualified Stock Option Certificate dated January 14, 1995, by and between the
Registrant and Gordon Stulberg. 10+
10.46 Non-Qualified Stock Option Certificate dated January 14, 1995, by and between the
Registrant and Matthew Saver. 10+
10.47 Non-Qualified Stock Option Certificate dated January 14, 1995, by and between the
Registrant and Tofigh Shirazi. 10+
10.50 Letter amendment to Stock Option Agreements dated August 10, 1995 by and between the
Registrant and Said (Sam) Pirnazar. 10+
78
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.53 Non-Qualified Stock Option Agreement, dated January 30, 1996 by and between the
Registrant and Mark Amin. 11+
10.54 Amendment to Non-Qualified Stock Option Agreement, dated January 30, 1996 by and between
the Registrant and Timothy Swain. 11+
10.56 Amendment to Non-Qualified Stock Option Agreement dated March 31, 1994, by and between
the Registrant and Sergio Aguero. 12+
10.57 Non-Qualified Stock Option Agreement dated August 10, 1995, by and between the Registrant
and Sergio Aguero. 12+
10.58 Non-Qualified Stock Option Certificate dated January 14, 1996. by and between the
Registrant and Matthew Saver. 12+
10.59 Non-Qualified Stock Option Certificate dated January 14, 1996, by and between the
Registrant and Tofigh Shirazi. 12+
10.60 Non-Qualified Stock Option Certificate dated January 14, 1996, by and between the
Registrant and Gordon Stulberg. 12+
10.62 Non-Qualified Stock Option Agreement dated July 2, 1996, by and between the Registrant
and Timothy Swain. 13+
10.63 Employment Agreement, dated August 30, 1995, by and between Trimark Pictures, Inc., a
California corporation and Sergio Aguero, as amended to date. 14+
10.65 Credit, Security, Guaranty and Pledge Agreement, dated December 20, 1996, by and between
the Registrant's principal operating subsidiaries, Trimark Pictures, Inc. and Trimark
Television, Inc., and The Chase Manhattan Bank, as Administrative Agent and Fronting
Bank. 14
79
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.68 Letter waiver and amendment to Credit, Security, Guaranty and Pledge Agreement, dated
February 20, 1997, by and between the Registrant's principal operating subsidiaries,
Trimark Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan Bank, as
Administrative Agent and Fronting Bank. 16
10.69 Non-Qualified Stock Option Certificate dated January 14, 1997, by and between the
Registrant and Matthew Saver. 16+
10.70 Non-Qualified Stock Option Certificate dated January 14, 1997, by and between the
Registrant and Tofigh Shirazi. 16+
10.71 Non-Qualified Stock Option Certificate dated January 14, 1997, by and between the
Registrant and Gordon Stulberg. 16+
10.72 Pledge Agreement, dated May 1, 1997, by and between Trimark Pictures, Inc. and Mark Amin
and Susan Amin. 17+
10.73 Secured Promissory Note, dated May 1, 1997, by and between Trimark Pictures, Inc. and
Mark Amin. 17+
10.76 Letter amendment to Stock Purchase and Option Agreement, dated July 25, 1997, by and
between the Registrant and Sam Pirnazar. 17+
10.77 Letter waiver and amendment to Credit, Security, Guaranty and Pledge Agreement, dated
June 9, 1997, by and between the Registrant and The Chase Manhattan Bank, as
Administrative Agent and Fronting Bank. 17
10.79 Amendment no. 1 to the Credit, Security, Guaranty and Pledge Agreement, dated June 30,
1997, by and between the Registrant's principal operating subsidiaries, Trimark Pictures,
Inc. and Trimark Television, Inc., and The Chase Manhattan Bank, as Administrative Agent
and Fronting Bank. 17
80
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.80 Non-Qualified Stock Option Certificate dated January 14, 1998, by and between the
Registrant and Gordon Stulberg. 18+
10.81 Non-Qualified Stock Option Certificate dated January 14, 1998, by and between the
Registrant and Matthew H. Saver. 18+
10.82 Non-Qualified Stock Option Certificate dated January 14, 1998, by and between the
Registrant and Tofigh Shirazi. 18+
10.83 Amendment no. 2 to the Credit, Security, Guaranty and Pledge Agreement, dated March 31,
1998, by and between the Registrant's principal operating subsidiaries, Trimark Pictures,
Inc. and Trimark Television, Inc., and The Chase Manhattan Bank, as Administrative Agent
and Fronting Bank. 19
10.84 Consulting Agreement, dated April 2, 1998, by and between Trimark Pictures, Inc. and
Burlage\Edell Productions, Inc. f/s/o Roger Burlage. 18+
10.85 Letter Agreement, dated April 2, 1998, by and between Trimark Holdings, Inc. and Roger
Burlage. 18+
10.86 Employment Agreement, dated January 30, 1997 between Trimark Pictures, Inc., and Cami
Winikoff. 20+
10.87 Amendment dated November 20, 1998 to August 8, 1992 Non-Qualified Stock Option Agreement
between the Company and Tim Swain. 21+
10.88 Amendment dated November 20, 1998 to January 14, 1992 Non-Qualified Stock Option
Agreement between the Company and Tim Swain. 21+
10.89 Amendment dated November 20, 1998 to March 31, 1994 Non-Qualified Stock Option Agreement
between the Company and Tim Swain. 21+
81
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.90 Amendment dated November 20, 1998 to July 2, 1996 Non-Qualified Stock Option Agreement
between the Company and Tim Swain. 21+
10.91 Amendment dated November 20, 1998 to July 2, 1996 Non-Qualified Stock Option Agreement
between the Company and Tim Swain. 21+
10.92 Amendment dated November 20, 1998 to January 20, 1993 Non-Qualified Stock Option
Agreement between the Company and Cami Winikoff. 21+
10.93 Amendment dated November 20, 1998 to January 30, 1996 Non-Qualified Stock Option
Agreement between the Company and Cami Winikoff. 21+
10.94 Amendment dated November 20, 1998 to January 30, 1996 Non-Qualified Stock Option
Agreement between the Company and Cami Winikoff. 21+
10.95 Amendment dated November 20, 1998 to February 27, 1997 Non-Qualified Stock Option
Agreement between the Company and Cami Winikoff. 21+
10.96 Letter Amendment dated August 14, 1998 and November 27, 1998 between the Company and Sam
Pirnazar. 21+
10.97 Amendment dated December 31, 1998 to the Credit, Security, Guaranty and Pledge Agreement
between the Company and The Chase Manhattan Bank, as Administrative Agent and Fronting
Bank. 21
10.98 Non-Qualified Stock Option Agreement dated February 2, 1999 between the Company and Cami
Winikoff. 22+
10.99 Employment Agreement dated February 1, 1999 between Trimark Pictures, Inc. and Cami
Winikoff. 22+
10.100 Trimark Holdings, Inc. 1999 Directors' Option Plan. 22+
82
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.101 Non-Qualified Stock Option Certificate dated January 8, 1999 between the Company and
Gordon Stulberg. 22+
10.102 Non-Qualified Stock Option Certificate dated January 8, 1999 between the Company and
Matthew H. Saver. 22+
10.103 Non-Qualified Stock Option Certificate dated January 8, 1999 between the Company and
Tofigh Shirazi. 22+
10.104 Non-Qualified Stock Option Certificate dated January 8, 1999 between the Company and
Roger Burlage. 22+
10.105 Agreement dated February 22, 1999 among broadcast.com inc., the Company, Trimark
Pictures, Inc., Trimark Television, Inc. and Trimark Music, and amendment thereto dated
March 15, 1999 (as indicated by asterisk, portions of the February 22, 1999 agreement
have been redacted pursuant to a confidentiality order). 22
10.106 Waiver letter dated as of March 15, 1999 regarding the Credit, Security, Guaranty and
Pledge Agreement dated as of December 20, 1996, as amended, among Trimark Pictures, Inc.,
Trimark Television, Inc., the Guarantors referred to therein, the Lenders referred to
therein, and The Chase Manhattan Bank, as Administrative Agent and Fronting Bank. 22
10.107 Employment Agreement dated August 6, 1998 between Trimark Pictures, Inc., and Andrew
Reimer. 24
10.108 Amendment No. 4 to the Credit, Security, Guaranty and Pledge Agreement, dated September
27, 1999, by and between the Registrant's principal operating subsidiaries, Trimark
Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan Bank, as
Administrative Agent and Fronting Bank. 25
83
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.109 1999 Stock Option Plan of the Registrant. 28
10.110 Amendment No. 5 to the Credit, Security, Guaranty and Pledge Agreement, dated December
20, 1999, by and between the Registrant's principal operating subsidiaries, Trimark
Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan Bank, as
Administrative Agent and Fronting Bank. 26
10.111 Standard Office Lease - Dated May 5, 1999, by and between Trimark Pictures, Inc.,
a California corporation and TIAA Realty, Inc., a Delaware corporation. 26
10.112 Non-Qualified Stock Option Certificate dated January 8, 2000 by and between the
Registrant and Gordon Stulberg. 27+
10.113 Non-Qualified Stock Option Certificate dated January 8, 2000 by and between the
Registrant and Matthew H. Saver. 27+
10.114 Non-Qualified Stock Option Certificate dated January 8, 2000 by and between the
Registrant and Tofigh Shirazi. 27+
10.115 Non-Qualified Stock Option Certificate dated January 8, 2000 by and between the
Registrant and Peter Dekom. 27+
10.116 Securities Purchase Agreement dated as of January 6, 2000 among CinemaNow, Inc. and the
investors names therein. 27
10.117 Co-Sale Agreement dated as of January 6, 2000 among CinemaNow, Inc., the investors
named therein and the founders named therein (including the Registrant) 27
84
ITEM 14. (CONTINUED)
Exhibit
Number Description
- ------- -------------------------------------------------------------------------------------------
10.118 Investors' Rights Agreement dated as of January 6, 2000 among CinemaNow, Inc., the
investors named therein and the founders named therein (including the Registrant) 27
10.119 Convertible Subordinated Debenture dated February 2, 2000 issued by CinemaNow, Inc. to
Trimark Pictures, Inc. 27
10.120 Agreement dated as of December 10, 1999 between Trimark Pictures, Inc. and CinemaNow,
Inc. 27
10.121 Stock Option Agreement (#1) dated March 1, 2000 between CinemaNow, Inc. and Mark Amin.
27+
10.122 Stock Option Agreement (#2) dated March 1, 2000 between CinemaNow, Inc. and Mark Amin.
27+
10.123 Stock Option Agreement (#3) dated March 1, 2000 between CinemaNow, Inc. and Mark Amin.
27+
10.124 Amendment of Employment Agreement, dated as of March 23, 2000, by and between Trimark
Pictures, Inc., a California corporation and Cami Winikoff. 27+
10.125 Amendment No. 6 to the Credit, Security, Guaranty and Pledge Agreement, dated
March 29, 2000, by and between the Registrant's principal operating subsidiaries, Trimark
Pictures, Inc. and Trimark Television, Inc., and The Chase Manhattan Bank, as
Administrative Agent and Fronting Bank. 1
10.126 Amendment No. 7 to the Credit, Security, Guaranty and Pledge Agreement, dated June 6, 2000,
by and between the Registrant's principal operating subsidiaries, Trimark Pictures, Inc. and
Trimark Television, Inc., and The Chase Manhattan Bank, as Administrative Agent and
Fronting Bank. 1
21.1 Subsidiaries of Registrant. 1
23.1 Consent of PricewaterhouseCoopers LLP. 1
27 Financial Data Schedule. 1
85
ITEM 14. (CONTINUED)
- -------------------------------
1 Filed herewith.
2 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1991. 3
Intentionally omitted.
4 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
5 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993.
6 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1993.
7 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
8 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994.
9 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
10 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995
11 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
12 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996
13 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
14 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1996.
15 Incorporated by reference to the identical exhibit number in Registrant's
Current Report on Form 8-K dated February 21, 1997.
16 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
17 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997
86
ITEM 14. (CONTINUED)
18 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
19 Incorporated by reference to the identical exhibit number in Registrant's
Current Report on Form 8-K dated May 15, 1998 (filed May 26, 1998).
20 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
21 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1998.
22 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
23 Incorporated by reference to the identical exhibit number in Registrant's
Current Report on Form 8-K dated June 6, 2000 (filed June 16, 2000).
24 Incorporated by reference to the identical exhibit number in Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1999.
25 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
26 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1999.
27 Incorporated by reference to the identical exhibit number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
28 Incorporated by reference to Annex A to the Registrant's proxy statement
dated October 15, 1999.
+ This is a management contract or compensatory plan or arrangement.
87
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIMARK HOLDINGS, INC.
By: /s/ Mohammed Mark Amin
----------------------
Mohammed Mark Amin
Chairman of the Board
Date: September 28, 2000
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Mohammed Mark Amin Chairman of the Board 09/28/00
- --------------------------- and Chief Executive
Mohammed Mark Amin Officer [Principal
Executive Officer]
/s/ Peter Dekom Director 09/28/00
- ---------------------------
Peter Dekom
/s/ Gordon Stulberg Director 09/28/00
- ---------------------------
Gordon Stulberg
/s/ Tofigh Shirazi Director 09/28/00
- ---------------------------
Tofigh Shirazi
/s/ Matthew Saver Director 09/28/00
- ---------------------------
Matthew Saver
/s/ Jeff Gonzalez Chief Financial 09/28/00
- --------------------------- Officer, and Secretary
Jeff Gonzalez [Principal Financial
and Accounting Officer]
88
INDEX TO EXHIBITS
Exhibit Method
Number Description of Filing
- ---------------------------------------------------------------------------------------------------------------
10.125 Amendment No. 6 to the Credit, Security, Guaranty and Pledge Agreement, filed herewith
dated March 29, 2000, by and between the Registrant's principal operating electronically
subsidiaries, Trimark Pictures, Inc. and Trimark Television, Inc., and
The Chase Manhattan Bank, as Administrative Agent and Fronting Bank.
10.126 Amendment No. 7 to the Credit, Security, Guaranty and Pledge Agreement, filed herewith
dated June 6, 2000, by and between the Registrant's principal operating electronically
subsidiaries, Trimark Pictures, Inc. and Trimark Television, Inc., and
The Chase Manhattan Bank, as Administrative Agent and Fronting Bank.
21.1 Subsidiaries of Registrant. filed herewith
electronically
23.1 Consent of PricewaterhouseCoopers LLP. filed herewith
electronically
27 Financial Data Schedule. filed herewith
electronically
89