-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VP9d+Wcxf9lX+sjVtvIGXhPhyCClNRDlPFaR/HMedvKxHQeCnNL4XBlsSO+UgKks pCgqfAhrdXJkZogM1RapEw== 0000801441-94-000011.txt : 19941003 0000801441-94-000011.hdr.sgml : 19941003 ACCESSION NUMBER: 0000801441-94-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19940810 ITEM INFORMATION: Other events FILED AS OF DATE: 19940930 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAROLCO PICTURES INC CENTRAL INDEX KEY: 0000801441 STANDARD INDUSTRIAL CLASSIFICATION: 7812 IRS NUMBER: 954046437 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09264 FILM NUMBER: 94551010 BUSINESS ADDRESS: STREET 1: 8800 SUNSET BLVD CITY: LOS ANGELES STATE: CA ZIP: 90069 BUSINESS PHONE: 3108598800 MAIL ADDRESS: STREET 1: 8800 SUNSET BLVD CITY: LOS ANGELES STATE: CA ZIP: 90069 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 10, 1994 CAROLCO PICTURES INC. (Exact name of registrant as specified in its charter) Delaware 1-9264 95-406437 (State or other (Commission (I.R.S. Employer jurisdiction of File Number Identification No.) Incorporation) 8800 Sunset Boulevard, Los Angeles, California 90069 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (310) 859-8800 N/A (Former name or former address, if changed since last report) Exhibit Index at page 9 Page 1 of 11 pages Item 5. Other Events. a. Proposed Merger with LIVE Entertainment Inc. Carolco Pictures Inc., a Delaware corporation ("Carolco"), LIVE Entertainment Inc., a Delaware corporation ("LIVE"), and Carolco Acquisition Corp., a wholly owned subsidiary of LIVE ("CAC"), entered into an Agreement and Plan of Merger dated as of August 10, 1994 (the "Merger Agreement") providing for a business combination of Carolco and LIVE. The Merger Agreement provides, among other things, that CAC will be merged with and into Carolco (the "Merger") with Carolco as the surviving corporation continuing as a wholly owned subsidiary of LIVE. At the effective date of the Merger, LIVE will be renamed Carolco Entertainment Inc. ("Carolco Entertainment"). The Merger has been structured with the intent that it qualify as a tax free reorganization whereby each Carolco stockholder will receive one share of newly issued Carolco Entertainment common stock for each 5.5 shares of Carolco common stock held. The exchange ratio will be adjusted based on the market price of Carolco common stock prior to the consummation of the Merger subject to two limitations designed to limit the effect of market fluctuations on both Carolco and LIVE stockholders. The number of Carolco shares to be exchanged for each share of Carolco Entertainment will be adjusted upward, if necessary, so that the market value of Carolco shares to be exchanged for one share of Carolco Entertainment is at least $3.00, but in no event will more than 6.5 shares of Carolco be exchanged for each share of Carolco Entertainment. Likewise, the number will be adjusted downward, if necessary, so that the market value of Carolco shares to be exchanged is no more than $4.00, but in no event will fewer than 4.5 shares of Carolco be exchanged for each share of Carolco Entertainment. If the Merger had closed on the date of this report, the exchange ratio would have been 6.5 to 1. In addition, each outstanding share of Carolco's Series A Convertible Preferred Stock will be converted into one share of a new series of preferred stock to be authorized by Carolco Entertainment. As a result, immediately upon consummation of the Merger, the current LIVE stockholders will own between approximately 21% and 28% of the surviving corporation and the remainder will be owned by the current Carolco stockholders. Therefore, the Merger, if consummated, will be treated as a reverse acquisition of LIVE by Carolco for accounting and financial reporting purposes and the purchase method of accounting will be applied to a portion of the historical values of LIVE's assets and liabilities. Additionally, to the extent of common ownership between LIVE and Carolco (54.6% of LIVE's common stock is owned by significant stockholders of Carolco), a portion of the transaction will be treated as a combination of companies under common control, similar to a pooling. The Merger is subject to a number of conditions, including the Page 2 of 11 pages redemption of LIVE's Series B Cumulative Convertible Preferred Stock, certain amendments to various public and private securities of LIVE and the availability of certain ongoing financing commitments prior to the combination. The Merger is also subject to the approval of the combination by the non-affiliated stockholders of both companies and other customary conditions to closing. On June 30, 1994, The Seidler Companies Incorporated ("Seidler") delivered its written opinion to the Carolco Board of Directors that, based on the conditions and assumptions contained therein, the financial terms of the Merger are fair to the unaffiliated stockholders of Carolco. Chemical Securities Inc., an affiliate of Chemical Bank ("Chemical Securities"), delivered its written opinion dated as of July 1, 1994 to the LIVE Board of Directors that, based on the conditions and assumptions contained therein, the exchange ratio for the Merger is fair to the unaffiliated stockholders of LIVE. The opinions of Seidler and Chemical Securities will be updated to a date just prior to the consummation of the Merger. There can be no assurances that the conditions will be met, the Merger will be consummated, or, if consummated, will be consummated on the terms set forth above. In conjunction with the Merger Agreement, Carolco entered into Investor Representation Agreements dated as of August 10, 1994 (the "Investor Representation Agreements") with each of Pioneer LDCA, Inc. ("Pioneer"), Cinepole Productions B.V. ("Cinepole"), RCS Video International Services B.V. ("RCS"), MGM Holdings Corporation ("MGM Holdings") and New Carolco Investments B.V. ("New CIBV"), which in the aggregate hold approximately 85.3% of the Carolco voting power which would currently be entitled to vote on the Merger. LIVE is also a party to the Investor Representation Agreements of Pioneer, Cinepole and RCS, which in the aggregate hold approximately 68.4% of the LIVE voting power which would currently be entitled to vote on the Merger. The Investor Representation Agreements provide that, subject to receipt of definitive proxy materials, such stockholders will vote all shares of Carolco stock and, with respect to Pioneer, Cinepole and RCS, all shares of LIVE stock beneficially owned by them in favor of the Merger Agreement and the transactions contemplated thereby. Pioneer, Cinepole, RCS, MGM Holdings (collectively, the "Strategic Investors") and New CIBV also entered into a Stockholders Agreement (the "Stockholders Agreement") which provides for certain corporate governance procedures relating to the post-merger company. To permit Carolco to proceed with certainty with the transactions contemplated by the Merger Agreement, on August 11, 1994, Mr. Kassar and Carolco entered into a new employment agreement dated as of August 10, 1994 (the "1994 Employment Agreement") which amends and restates the Employment Agreement of Mr. Kassar dated as of May 3, 1993. Pursuant to the Merger Agreement and an Assumption Agreement dated as of August 10, 1994 among Carolco, LIVE and Mr. Kassar, as of the effective date of the Page 3 of 11 pages Merger, LIVE will assume each of the obligations of Carolco under the 1994 Employment Agreement. In addition, Carolco entered into a related Stock Option Agreement with Mr. Kassar dated as of August 10, 1994 (the "Stock Option Agreement"). The Merger Agreement, Investor Representation Agreements, Stockholders Agreement, 1994 Employment Agreement and Stock Option Agreement are Exhibits to this Form 8-K. a. Financial Condition and Operations of Carolco. Carolco currently has two motion pictures in pre-production: Cutthroat Island starring Geena Davis and Matthew Modine and directed by Renny Harlin and Showgirls directed by Paul Verhoeven. Both pictures are currently scheduled to commence principal photography in October 1994 and to be completed and available for release in mid-1995. Carolco has reached an agreement regarding the terms and has accepted the commitment of a group of banks, including Credit Lyonnais Bank Nederland N.V., to provide an individual production loan to finance a substantial portion of the cost of Cutthroat Island. Although management of Carolco believes it is likely that Carolco will be able to satisfy all of the conditions to the funding of such production loan, there can be no assurance that this will be the case. In the event Carolco is unable to successfully consummate such production loan, it will be required to procure financing from alternative sources in order to complete the production of Cutthroat Island (although no assurance can be given that such financing can be obtained or obtained on terms acceptable to Carolco). Prior to the commencement of the negotiations described below to sell Showgirls to an affiliate of MGM Holdings (such affiliate, "MGM"), a similar production loan was being negotiated for that motion picture. Although agreements in principle have been reached between Carolco and various distributors with regard to the pre-sale of a substantial portion of the distribution rights for both Cutthroat Island and Showgirls, due to production and casting delays, the documentation of these pre-sales has not yet been completed. In addition, due to such delays, Carolco has not yet obtained a completion bond (also known as an "over-budget" guaranty) for either film. Carolco will be unable to access the Cutthroat Island production loan described above (and would not have been able to access the Showgirls production loan, assuming it were to be successfully negotiated) until such pre-sales and completion bonds have been finalized and pledged as collateral to secure such production loans. Carolco recently determined that it is unlikely that it will be able to access either of such loans prior to late in the fourth quarter of 1994. In addition to its ongoing overhead expenses, Carolco is currently funding the pre-production expenses of both motion pictures from its current cash balances. At the Page 4 of 11 pages current rate of expenditure (including increased expenditures when principal photography commences for the two films), Carolco will face an extreme cash shortage prior to the anticipated funding of the production loans and will be unable to complete either film. Several steps are currently being taken to address Carolco's liquidity problem. Carolco has entered into negotiations regarding the sale of its entire interest in Showgirls to MGM. In addition, Pioneer has agreed, subject to certain conditions, to advance certain overage payments anticipated to be due with respect to Cliffhanger and Terminator 2: Judgment Day over the next several months from exisiting licenses in Japan. RCS has agreed to negotiate certain amendments to the agreement pursuant to which it is required to purchase Carolco's 7% Convertible Subordinated Notes due 2006 on December 30, 1994 in order to permit Carolco to borrow against the funds to be received from RCS prior to such date. Le Studio Canal+ S.A., an affiliate of Cinepole, has agreed, subject to the sale of Showgirls to MGM and the performance by Pioneer and RCS of their respective agreements, to advance approximately $2,000,000 of commisions which will be due to Carolco in the fourth quarter of 1994 for serving as the foreign sales agent for the motion picture Stargate. The agreements of MGM, Pioneer, RCS and Le Studio Canal+ are subject to the approvals of their respective boards of directors. Carolco is continuing to use its best efforts to complete the steps required to access the Cutthroat Island production loan as soon as possible. It is anticipated that a combination of borrowings under the Cutthroat Island production loan, the funds to be received from the proposed sale of Showgirls and the interim financing arrangements described above will be sufficient to fund the production of Cutthroat Island and the other operations of Carolco through the closing of the Cutthroat Island production loan. There can be no assurance that Carolco will be successful in its efforts to borrow under the Cutthroat Island production loan in a timely manner, complete the sale of Showgirls or consummate the interim financing arrangements described above. In the event Carolco is not successful in these efforts, it is likely that Carolco will be forced to cease production of Cutthroat Island and, if not sold to MGM, Showgirls, and Carolco may be unable to meet its other obligations and may be unable to continue to operate as a going concern. The solicitation of votes of stockholders of both Carolco and LIVE with respect to the Merger will be made through the distribution of definitive proxy materials in accordance with the Securities Exchange Act of 1934. Carolco intends to file preliminary proxy materials with the Securities and Exchange Commission in connection with the Merger and in connection with the preparation of such filing has been informed by its independent Page 5 of 11 pages auditors that because of Carolco's current financial condition, the Report of Independent Auditors covering Carolco's financial statements for the year ended December 31, 1993 will be re-issued with an explanatory paragraph which indicates that such financial condition raises substantial doubt about the ability of Carolco to continue as a going concern. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired. Not applicable. (b) Pro Forma Financial Information. Not applicable. (c) Exhibits. The Exhibits listed below are filed as part of this Report. Exhibit No. Description of Exhibit 2.1 Agreement and Plan of Merger dated as of August 10, 1994 among Carolco Pictures Inc., LIVE Entertainment Inc. and Carolco Acquisition Corp. (including certain exhibits thereto). 10.1 Investor Representation Agreement dated as of August 10, 1994 by and between Carolco Pictures Inc., LIVE Entertainment Inc. and Pioneer LDCA, Inc. Incorporated by reference to Exhibit 10.2 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.2 Investor Representation Agreement dated as of August 10, 1994 by and between Carolco Pictures Inc., LIVE Entertainment Inc. and Cinepole Productions B.V. Incorporated by reference to Exhibit 10.3 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Page 6 of 11 pages Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.3 Investor Representation Agreement dated as of August 10, 1994 by and between Carolco Pictures Inc., LIVE Entertainment Inc. and RCS Video International Services B.V. Incorporated by reference to Exhibit 10.4 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.4 Investor Representation Agreement dated August 10, 1994 by and between Carolco Pictures Inc. and MGM Holdings Corporation. 10.5 Investor Representation Agreement dated August 10, 1994 by and between Carolco Pictures Inc. and New Carolco Investments B.V. Incorporated by reference to Exhibit 4 to Mario F. Kassar and New Carolco Investments B.V.'s Schedule 13D (Amendment No. 14) under the Securities Exchange Act of 1934 filed with the Commission on August 16, 1994. 10.6 Stockholders Agreement dated as of August 10, 1994 by and between New Carolco Investments B.V., Pioneer LDCA, Inc., Cinepole Productions B.V., RCS Video International Services B.V. and MGM Holdings Corporation. Incorporated by reference to Exhibit 10.5 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.7 Employment Agreement between Carolco Pictures Inc. and Mario F. Kassar for the services of Mario F. Kassar, dated as of August 10, 1994. Incorporated by reference to Exhibit 5 to Mario F. Kassar and New Carolco Investments B.V.'s Schedule 13D Page 7 of 11 pages (Amendment No. 14) under the Securities Exchange Act of 1934 filed with the Commission on August 16, 1994. 10.8 Stock Option Agreement of Mario F. Kassar dated as of August 10, 1994. Incorporated by reference to Exhibit 8 to Mario F. Kassar and New Carolco Investments B.V.'s Schedule 13D (Amendment No. 14) under the Securities Exchange Act of 1934 filed with the Commission on August 16, 1994. 99.1 Press Release dated August 12, 1994. Incorporated by reference to Exhibit 99.2 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. Page 8 of 11 pages SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CAROLCO PICTURES INC. By: /s/ Robert W. Goldsmith Robert W. Goldsmith, Senior Vice President, General Counsel and Secretary Date: September 29, 1994 Page 9 of 11 pages EXHIBIT INDEX Exhibit No. Description of Exhibit 2.1 Agreement and Plan of Merger dated as of August 10, 1994 among Carolco Pictures Inc., LIVE Entertainment Inc. and Carolco Acquisition Corp. (including certain exhibits thereto). 10.1 Investor Representation Agreement dated as of August 10, 1994 by and between Carolco Pictures Inc., LIVE Entertainment Inc. and Pioneer LDCA, Inc. Incorporated by reference to Exhibit 10.2 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.2 Investor Representation Agreement dated as of August 10, 1994 by and between Carolco Pictures Inc., LIVE Entertainment Inc. and Cinepole Productions B.V. Incorporated by reference to Exhibit 10.3 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.3 Investor Representation Agreement dated as of August 10, 1994 by and between Carolco Pictures Inc., LIVE Entertainment Inc. and RCS Video International Services B.V. Incorporated by reference to Exhibit 10.4 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.4 Investor Representation Agreement dated August 10, 1994 by and between Carolco Pictures Inc. and MGM Holdings Corporation. Page 10 of 11 pages 10.5 Investor Representation Agreement dated August 10, 1994 by and between Carolco Pictures Inc. and New Carolco Investments B.V. Incorporated by reference to Exhibit 4 to Mario F. Kassar and New Carolco Investments B.V.'s Schedule 13D (Amendment No. 14) under the Securities Exchange Act of 1934 filed with the Commission on August 16, 1994. 10.6 Stockholders Agreement dated as of August 10, 1994 by and between New Carolco Investments B.V., Pioneer LDCA, Inc., Cinepole Productions B.V., RCS Video International Services B.V. and MGM Holdings Corporation. Incorporated by reference to Exhibit 10.5 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. 10.7 Employment Agreement between Carolco Pictures Inc. and Mario F. Kassar for the services of Mario F. Kassar, dated as of August 10, 1994. Incorporated by reference to Exhibit 5 to Mario F. Kassar and New Carolco Investments B.V.'s Schedule 13D (Amendment No. 14) under the Securities Exchange Act of 1934 filed with the Commission on August 16, 1994. 10.8 Stock Option Agreement of Mario F. Kassar dated as of August 10, 1994. Incorporated by reference to Exhibit 8 to Mario F. Kassar and New Carolco Investments B.V.'s Schedule 13D (Amendment No. 14) under the Securities Exchange Act of 1934 filed with the Commission on August 16, 1994. 99.1 Press Release dated August 12, 1994. Incorporated by reference to Exhibit 99.2 to LIVE Entertainment Inc.'s Current Report on Form 8-K under the Securities and Exchange Act of 1934 filed with the Commission on September 15, 1994. Page 11 of 11 pages EX-2.1 2 [TYPE] 8-K [DOCUMENT-COUNT] 1 [FILER] [CIK] 0000801441 [CCC] XXXXXXXX [PERIOD] 08/10/94 [ITEMS] 1 [DESCRIPTION] MERGER AGREEMENT AGREEMENT AND PLAN OF MERGER Dated as of August 10, 1994 by and among LIVE Entertainment Inc. Carolco Acquisition Corp. and Carolco Pictures Inc. TABLE OF CONTENTS ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . 2 Section 1.1 The Merger. . . . . . . . . . . . . . 2 Section 1.2 Effective Date of the Merger; Closing.. . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 THE SURVIVING CORPORATION. . . . . . . . . . . . . . 2 Section 2.1 Certificate of Incorporation. . . . . 2 Section 2.2 Bylaws. . . . . . . . . . . . . . . . 2 Section 2.3 Board of Directors and Officers.. . . 3 ARTICLE 3 CHANGES AT LIVE AT OR BEFORE EFFECTIVE DATE. . . . . 3 Section 3.1 Certificate of Incorporation. . . . . 3 Section 3.2 Bylaws. . . . . . . . . . . . . . . . 3 Section 3.3 Board of Directors and Officers.. . . 4 Section 3.4 LIVE Home Video Inc.. . . . . . . . . 4 ARTICLE 4 CONVERSION AND EXCHANGE OF SHARES AND CERTIFICATES . 4 Section 4.1 Conversion. . . . . . . . . . . . . . 4 Section 4.2 LIVE to Make Certificates Available.. 6 Section 4.3 Dividends; Transfer Taxes.. . . . . . 8 Section 4.4 No Further Ownership Rights in Carolco Common Stock. . . . . . . . . . . . . . 9 Section 4.5 Closing of Carolco Transfer Books.. . 9 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF LIVE . . . . . . . 10 Section 5.1 Organization, Standing and Power. . . 10 Section 5.2 Subsidiaries. . . . . . . . . . . . . 10 Section 5.3 Capital Structure and Commitments.. . 11 Section 5.4 Authority; Non-Contravention. . . . . 12 Section 5.5 LIVE SEC Documents. . . . . . . . . . 14 Section 5.6 No Material Adverse Change. . . . . . 15 Section 5.7 Absence of Undisclosed Liabilities. . 15 Section 5.8 Absence of Certain Events.. . . . . . 15 Section 5.9 No Solicitation . . . . . . . . . . . 15 Section 5.10 Registration Statement and Proxy Statement.. . . . . . . . . . . . . . . . . . . 16 Section 5.11 Reorganization. . . . . . . . . . . . 16 Section 5.12 Litigation. . . . . . . . . . . . . . 16 Section 5.13 Loan Agreements, Customers and Suppliers.. . . . . . . . . . . . . . . . . . . 16 Section 5.14 Permits.. . . . . . . . . . . . . . . 17 Section 5.15 Absence of Changes in LIVE Benefit Plans.. . . . . . . . . . . . . . . . . . . . . 17 Section 5.16 Intellectual Property.. . . . . . . . 18 Section 5.17 Environmental Matters.. . . . . . . . 18 Section 5.18 Taxes.. . . . . . . . . . . . . . . . 18 Section 5.19 Foreign Corrupt Practices Act.. . . . 19 Section 5.20 Brokers.. . . . . . . . . . . . . . . 19 Section 5.21 Officers, Directors and Key Employees.. . . . . . . . . . . . . . . . . . . 19 Section 5.22 State Takeover Statutes.. . . . . . . 19 Section 5.23 Insurance.. . . . . . . . . . . . . . 20 Section 5.24 Title to Properties and Related Matters.. . . . . . . . . . . . . . . . . . . . 20 Section 5.25 Accuracy of LIVE Disclosure.. . . . . 20 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF CAROLCO. . . . . . 21 Section 6.1 Organization, Standing and Power. . . 21 Section 6.2 Subsidiaries. . . . . . . . . . . . . 21 Section 6.3 Capital Structure and Commitments.. . 21 Section 6.4 Authority; Non-Contravention. . . . . 23 Section 6.5 Carolco SEC Documents.. . . . . . . . 24 Section 6.6 No Material Adverse Change. . . . . . 25 Section 6.7 Absence of Undisclosed Liabilities. . 25 Section 6.8 Absence of Certain Events.. . . . . . 25 Section 6.9 No Solicitation . . . . . . . . . . . 25 Section 6.10 Registration Statement and Proxy Statement.. . . . . . . . . . . . . . . . . . . 26 Section 6.11 Reorganization. . . . . . . . . . . . 26 Section 6.12 Litigation. . . . . . . . . . . . . . 26 Section 6.13 Loan Agreements, Customers and Suppliers.. . . . . . . . . . . . . . . . . . . 26 Section 6.14 Permits.. . . . . . . . . . . . . . . 27 Section 6.15 Absence of Changes in Carolco Benefit Plans.. . . . . . . . . . . . . . . . . . . . . 27 Section 6.16 Intellectual Property.. . . . . . . . 27 Section 6.17 Environmental Matters.. . . . . . . . 28 Section 6.18 Taxes.. . . . . . . . . . . . . . . . 28 Section 6.19 Foreign Corrupt Practices Act.. . . . 28 Section 6.20 Brokers.. . . . . . . . . . . . . . . 28 Section 6.21 Officers, Directors and Key Employees.. . . . . . . . . . . . . . . . . . . 29 Section 6.22 State Takeover Statutes.. . . . . . . 29 Section 6.23 Insurance.. . . . . . . . . . . . . . 29 Section 6.24 Title to Properties and Related Matters.. . . . . . . . . . . . . . . . . . . . 29 Section 6.25 Accuracy of Carolco Disclosure. . . . 30 ARTICLE 7 REPRESENTATIONS AND WARRANTIES REGARDING CAC . . . . 30 Section 7.1 Organization and Standing.. . . . . . 30 Section 7.2 Capital Structure.. . . . . . . . . . 30 Section 7.3 Authority.. . . . . . . . . . . . . . 31 ARTICLE 8 COVENANTS RELATING TO CONDUCT OF BUSINESS. . . . . . 31 Section 8.1 Conduct of Business by LIVE Pending the Merger. . . . . . . . . . . . . . . . . . . 31 Section 8.2 Conduct of Business by Carolco Pending the Merger. . . . . . . . . . . . . . . 35 Section 8.3 Competing Offers. . . . . . . . . . . 39 Section 8.4 Reorganization. . . . . . . . . . . . 39 Section 8.5 Conduct of Business of CAC Pending the Merger. . . . . . . . . . . . . . . . . . . 40 Section 8.6 Update of LIVE LETTER and CAROLCO LETTER. . . . . . . . . . . . . . . . . . . . . 40 Section 8.7 Bringdown of Fairness Opinion.. . . . 40 ARTICLE 9 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . 40 Section 9.1 Carolco and LIVE Stockholder Approvals.. . . . . . . . . . . . . . . . . . . 40 Section 9.2 Registration Statement and Proxy Statement . . . . . . . . . . . . . . . . . . . 41 Section 9.3 Amendment to Indentures . . . . . . . 42 Section 9.4 Listing Application.. . . . . . . . . 43 Section 9.5 Access to Information.. . . . . . . . 43 Section 9.6 Affiliates. . . . . . . . . . . . . . 43 Section 9.7 Fees and Expenses.. . . . . . . . . . 43 Section 9.8 Carolco Stock Options.. . . . . . . . 44 Section 9.9 Other Obligations of Carolco and LIVE 45 Section 9.10 Registration Rights.. . . . . . . . . 46 Section 9.11 Best Efforts. . . . . . . . . . . . . 46 Section 9.12 Public Announcements. . . . . . . . . 47 Section 9.13 State Takeover Laws.. . . . . . . . . 47 Section 9.14 Indemnification.. . . . . . . . . . . 47 Section 9.15 [Intentionally Deleted.]. . . . . . . 48 Section 9.16 [Intentionally Deleted.]. . . . . . . 48 Section 9.17 LIVE Rights.. . . . . . . . . . . . . 48 Section 9.18 Continuation of Business or Business Assets. . . . . . . . . . . . . . . . . . . . . 48 ARTICLE 10 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . 48 Section 10.1 Conditions to Each Party's Obligation to Effect the Merger. . . . . . . . . . . . . . 48 Section 10.2 Conditions to Obligation of Carolco to Effect the Merger. . . . . . . . . . . . . . 50 Section 10.3 Conditions to Obligations of LIVE and CAC to Effect the Merger. . . . . . . . . . . . 52 ARTICLE 11 TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . 53 Section 11.1 Termination.. . . . . . . . . . . . . 53 Section 11.2 Effect of Termination.. . . . . . . . 55 Section 11.3 Amendment.. . . . . . . . . . . . . . 55 Section 11.4 Waiver. . . . . . . . . . . . . . . . 55 Section 11.5 Approval by LIVE Special Committee. . 56 ARTICLE 12 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . 56 Section 12.1 Non-Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . 56 Section 12.2 Notices.. . . . . . . . . . . . . . . 56 Section 12.3 Interpretation. . . . . . . . . . . . 60 Section 12.4 Counterparts. . . . . . . . . . . . . 60 Section 12.5 Entire Agreement; No Third-Party Beneficiaries.. . . . . . . . . . . . . . . . . 60 Section 12.6 Governing Law.. . . . . . . . . . . . 60 Section 12.7 Assignment. . . . . . . . . . . . . . 60 Glossary Amended and Restated Carolco 5% Indenture. . . . . . 45 Amended and Restated Standby Purchase and Investment Agreement. . . . . . . . . . . . . . . . . . . . . . 45 1986 Plan. . . . . . . . . . . . . . . . . . . . . . 44 1989 Plan. . . . . . . . . . . . . . . . . . . . . . 44 Advisory Committee . . . . . . . . . . . . . . . . . 13 Affiliates . . . . . . . . . . . . . . . . . . . . . 43 Agreement. . . . . . . . . . . . . . . . . . . . . . .1 Amended and Restated Bylaws of Carolco . . . . . . . .3 Amended and Restated Bylaws of LIVE. . . . . . . . . .3 Amended and Restated Certificate of Incorporation of LIVE . . . . . . . . . . . . . . . . . . . . . . . . .3 Average Trading Price. . . . . . . . . . . . . . . . .5 blue sky . . . . . . . . . . . . . . . . . . . . . . 14 CAC. . . . . . . . . . . . . . . . . . . . . . . . . .1 CAC Common Stock . . . . . . . . . . . . . . . . . . .6 Carolco. . . . . . . . . . . . . . . . . . . . . . . .1 Carolco 5% Notes . . . . . . . . . . . . . . . . . . 22 Carolco 7% Notes . . . . . . . . . . . . . . . . . . 22 Carolco 11.5%/10% Notes. . . . . . . . . . . . . . . 45 Carolco 13% Notes. . . . . . . . . . . . . . . . . . 45 Carolco 13%/12% Notes. . . . . . . . . . . . . . . . 45 Carolco Balance Sheet. . . . . . . . . . . . . . . . 25 Carolco Benefit Plans. . . . . . . . . . . . . . . . 27 Carolco Common Certificates. . . . . . . . . . . . . .6 Carolco Common Stock . . . . . . . . . . . . . . . . .1 Carolco Entertainment Inc. . . . . . . . . . . . . . .3 Carolco Investors. . . . . . . . . . . . . . . . . . 23 CAROLCO LETTER . . . . . . . . . . . . . . . . . . . 21 Carolco Preferred Stock. . . . . . . . . . . . . . . .1 Carolco Proprietary Rights . . . . . . . . . . . . . 27 Carolco Registration Rights Agreements . . . . . . . 23 Carolco SEC Documents. . . . . . . . . . . . . . . . 24 Carolco Series A Preferred Stock . . . . . . . . . . .6 Carolco Stock Plans. . . . . . . . . . . . . . . . . 44 Carolco Stockholder Meeting. . . . . . . . . . . . . 40 Certificate. . . . . . . . . . . . . . . . . . . . . .8 Certificate of Merger. . . . . . . . . . . . . . . . .2 Chemical . . . . . . . . . . . . . . . . . . . . . . 13 Chemical Fairness Opinion. . . . . . . . . . . . . . 13 Cinepole . . . . . . . . . . . . . . . . . . . . . . 13 Closing. . . . . . . . . . . . . . . . . . . . . . . .2 Code . . . . . . . . . . . . . . . . . . . . . . . . .1 competing proposal . . . . . . . . . . . . . . . . . 44 Constituent Corporations . . . . . . . . . . . . . . .1 Contingent Payment Rights. . . . . . . . . . . . . . 12 control share acquisition. . . . . . . . . . . . . . 19 D&O Insurance. . . . . . . . . . . . . . . . . . . . 47 date hereof. . . . . . . . . . . . . . . . . . . . . 60 date of this Agreement,. . . . . . . . . . . . . . . 60 DGCL . . . . . . . . . . . . . . . . . . . . . . . . .2 Effective Date . . . . . . . . . . . . . . . . . . . .2 Environmental Laws . . . . . . . . . . . . . . . . . 18 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 18 Exchange Act . . . . . . . . . . . . . . . . . . . . 14 Exchange Agent . . . . . . . . . . . . . . . . . . . .6 Exchange Ratio . . . . . . . . . . . . . . . . . . . .5 fair price . . . . . . . . . . . . . . . . . . . . . 19 Governmental Entity. . . . . . . . . . . . . . . . . 14 HSR Act. . . . . . . . . . . . . . . . . . . . . . . 14 include. . . . . . . . . . . . . . . . . . . . . . . 60 indebtedness . . . . . . . . . . . . . . . . . . . . 17 Investor Representation Agreement. . . . . . . . . . 13 Letter . . . . . . . . . . . . . . . . . . . . . . . 40 LHV. . . . . . . . . . . . . . . . . . . . . . . . . .4 LHV Bylaws . . . . . . . . . . . . . . . . . . . . . .4 LIVE . . . . . . . . . . . . . . . . . . . . . . . . .1 LIVE 12% Indenture . . . . . . . . . . . . . . . . . 42 LIVE 12% Notes . . . . . . . . . . . . . . . . . . . 32 LIVE Balance Sheet . . . . . . . . . . . . . . . . . 15 LIVE Benefit Plans . . . . . . . . . . . . . . . . . 18 LIVE Common Stock. . . . . . . . . . . . . . . . . . .4 LIVE Credit Facility . . . . . . . . . . . . . . . . 52 LIVE Increasing Rate Notes . . . . . . . . . . . . . 42 LIVE Increasing Rate Notes Indenture . . . . . . . . 42 LIVE Investors . . . . . . . . . . . . . . . . . . . 13 LIVE LETTER. . . . . . . . . . . . . . . . . . . . . 10 LIVE Preferred Stock . . . . . . . . . . . . . . . . .9 LIVE Proprietary Rights. . . . . . . . . . . . . . . 18 LIVE Registration Rights Agreements. . . . . . . . . 12 LIVE Right . . . . . . . . . . . . . . . . . . . . . 11 LIVE Rights Agreement. . . . . . . . . . . . . . . . 11 LIVE SEC Documents . . . . . . . . . . . . . . . . . 14 LIVE Series A Common Stock . . . . . . . . . . . . . 11 LIVE Series D Preferred Stock. . . . . . . . . . . . .6 LIVE Series B Preferred Stock. . . . . . . . . . . . 11 LIVE Series C Preferred Stock. . . . . . . . . . . . .6 LIVE Series R Preferred Stock. . . . . . . . . . . . 11 LIVE Special Committee . . . . . . . . . . . . . . . 13 LIVE Stockholder Meeting . . . . . . . . . . . . . . 41 Mailing. . . . . . . . . . . . . . . . . . . . . . . .8 Material Adverse Change. . . . . . . . . . . . . . . 10 Material Adverse Effect. . . . . . . . . . . . . . . 10 Merger . . . . . . . . . . . . . . . . . . . . . . . .1 MGM. . . . . . . . . . . . . . . . . . . . . . . . . 45 MGM Distribution Agreements. . . . . . . . . . . . . 45 moratorium . . . . . . . . . . . . . . . . . . . . . 19 New Carolco Entertainment Inc. Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . . . 46 New LIVE Certificates. . . . . . . . . . . . . . . . .7 New Plan . . . . . . . . . . . . . . . . . . . . . . 44 New Stock Option . . . . . . . . . . . . . . . . . . 44 offer. . . . . . . . . . . . . . . . . . . . . . . . 39 Old LIVE Certificates. . . . . . . . . . . . . . . . .7 Option Registration Statement. . . . . . . . . . . . 42 Pay-Per-View Shares. . . . . . . . . . . . . . . . . 22 Pioneer. . . . . . . . . . . . . . . . . . . . . . . 13 Plan Option. . . . . . . . . . . . . . . . . . . . . 44 Proxy Statement. . . . . . . . . . . . . . . . . . . 16 RCS. . . . . . . . . . . . . . . . . . . . . . . . . 13 Registration Statement . . . . . . . . . . . . . . . 16 Restated Certificate of Incorporation of Carolco . . .2 Restated Certificate of Incorporation of LIVE. . . . .3 Securities Act . . . . . . . . . . . . . . . . . . . 14 Seidler. . . . . . . . . . . . . . . . . . . . . . . 23 Seidler Fairness Opinion . . . . . . . . . . . . . . 23 Series A Certificates. . . . . . . . . . . . . . . . .7 Series C Certificate of Designations . . . . . . . . .6 Significant Carolco Employees. . . . . . . . . . . . 29 Significant LIVE Employees . . . . . . . . . . . . . 19 Stockholder Meetings . . . . . . . . . . . . . . . . 41 Strawberries . . . . . . . . . . . . . . . . . . . . 10 Subsidiary . . . . . . . . . . . . . . . . . . . . . 10 Surviving Corporation. . . . . . . . . . . . . . . . .2 takeover proposal. . . . . . . . . . . . . . . . . . 39 TCI Purchase Agreement . . . . . . . . . . . . . . . 22 Trading Day. . . . . . . . . . . . . . . . . . . . . .6 Trading Price. . . . . . . . . . . . . . . . . . . . .5 VCL. . . . . . . . . . . . . . . . . . . . . . . . . 10 without limitation.. . . . . . . . . . . . . . . . . 60 Exhibits Exhibit 1.2 Certificate of Merger Exhibit 2.1 Restated Certificate of Incorporation of Carolco Exhibit 2.2 Amended and Restated Bylaws of Carolco Exhibit 2.3 Board of Directors of Carolco at Effective Date Exhibit 3.1 Amended and Restated Certificate of Incorporation of Carolco Entertainment Inc. Exhibit 3.2 Amended and Restated Bylaws of Carolco Entertainment Inc. Exhibit 3.3A Board of Directors and Committees of Carolco Entertainment Inc. at Effective Date Exhibit 3.3B Officers of Carolco Entertainment Inc. at Effective Date Exhibit 3.4 Amended Bylaws of LHV Exhibit 5.3A Warrant Agreements and Options for LIVE Common Stock Exhibit 5.3B LIVE Registration Rights Agreements Exhibit 5.4(c) Investor Representation Agreement Exhibit 6.3A Options for Carolco Common Stock Exhibit 6.3B Carolco Registration Rights Agreements Exhibit 9.3(a) Amendment to LIVE 12% Indenture Exhibit 9.3(b) Amendment to LIVE Increasing Rate Notes Indenture Exhibit 9.8(d) 1994 Stock Option and Stock Appreciation Rights Plan Exhibit 9.9(a) Assumption Agreement with respect to Carolco-Mario Kassar Employment Agreement Exhibit 9.9(b) Amended and Restated Carolco 5% Indenture Exhibit 9.9(c) Amended and Restated Standby Purchase and Investment Agreement with respect to the Carolco 7% Notes Exhibit 9.9(d) First Supplemental Indenture with respect to the Carolco 11.5%/10% Notes Exhibit 9.9(e) First Supplemental Indenture with respect to the Carolco 13%/12% Notes Exhibit 9.9(f) First Supplemental Indenture with respect to the Carolco 13% Notes Exhibit 9.9(g) Assumption Agreement with respect to the MGM Distribution Agreements Exhibit 9.9(h) Assumption Agreement with respect to RCS Agreements Exhibit 9.9(i) Assumption Agreement with respect to Canal+ Agreements Exhibit 9.9(j) Assumption Agreement with respect to Pioneer Agreements Exhibit 9.10 New Carolco Entertainment Inc. Registration Rights Agreement Exhibit 10.1(f) Terms of Aggregate Working Capital Commitments Exhibit 10.2(d) Form of Opinion of Counsel to LIVE and CAC Exhibit 10.3(d) Form of Opinion of Counsel to Carolco AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of August 10, 1994 (this "Agreement"), by and among LIVE Entertainment Inc., a Delaware corporation ("LIVE"), Carolco Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of LIVE ("CAC"), and Carolco Pictures Inc., a Delaware corporation ("Carolco") (CAC and Carolco being hereinafter collectively referred to as the "Constituent Corporations"). W I T N E S S E T H: WHEREAS, LIVE is a corporation duly organized and existing under the laws of the State of Delaware with an authorized capitalization as set forth in Section 5.3 hereof; WHEREAS, Carolco is a corporation duly organized and existing under the laws of the State of Delaware with an authorized capitalization as set forth in Section 6.3 hereof; WHEREAS, CAC is a corporation duly organized and existing under the laws of the State of Delaware with an authorized capitalization as set forth in Section 7.2 hereof and is a wholly-owned subsidiary of LIVE; WHEREAS, the respective Boards of Directors of LIVE, CAC and Carolco have approved and declared fair to and in the best interests of their respective corporations and stockholders, and LIVE acting as the sole stockholder of CAC has approved, the merger of CAC with and into Carolco (the "Merger"), upon the terms and subject to the conditions set forth herein, whereby each issued and outstanding share of the common stock, par value $.01 per share, of Carolco ("Carolco Common Stock") and each issued and outstanding share of the preferred stock, par value $1.00 per share, of Carolco ("Carolco Preferred Stock"), will be cancelled and converted into the right to receive such consideration as is hereinafter described; WHEREAS, for federal income tax purposes, the parties hereto intend that the Merger shall qualify as a tax free reorganization within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, LIVE, CAC and Carolco desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe various conditions to the Merger; NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE 1 THE MERGER Section 1.a The Merger. At the Effective Date (as defined in Section 1.2), CAC shall be merged with and into Carolco in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the "DGCL") with Carolco as the surviving corporation in the Merger (the "Surviving Corporation"), the separate existence of CAC shall thereupon cease, and Carolco, as the Surviving Corporation, shall continue its corporate existence under the laws of the State of Delaware. From and after the Effective Date, the Merger shall have all the effects provided in Section 259(a) of the DGCL. Section 1.b Effective Date of the Merger; Closing. (i) The Merger shall become effective when a properly executed Certificate of Merger in the form attached hereto as Exhibit 1.2 is duly filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL (the "Certificate of Merger"), which filing shall be made as soon as practicable after the Closing hereinafter contemplated; provided, however, that, upon mutual consent of the Constituent Corporations, the Certificate of Merger may provide for a later date and time of effectiveness of the Merger in accordance with the DGCL, in which case the Merger shall become effective at the date and time specified in the Certificate of Merger. When used in this Agreement, the term "Effective Date" shall mean the date and time at which such actions are completed and such Merger becomes effective. (ii) The closing of the transactions contemplated by this Agreement (the "Closing") shall take place (i) at the offices of Sidley & Austin, 2049 Century Park East, Los Angeles, California, at 10:00 A.M. local time on the later of (A) the next business day after the date of the later of the stockholders' meetings referred to in Section 9.1 and (B) the day on which the last of the conditions set forth in Article 9 is fulfilled or waived or (ii) at such other time and place as LIVE and Carolco shall agree. ARTICLE 2 THE SURVIVING CORPORATION Section 2.a Certificate of Incorporation. The Certificate of Incorporation of Carolco as in effect immediately prior to the Effective Date ("Restated Certificate of Incorporation of Carolco"), attached hereto as Exhibit 2.1, as amended by the Certificate of Merger, at and after the Effective Date shall become the Certificate of Incorporation of the Surviving Corporation unless and until thereafter amended in accordance with its terms and applicable law. Section 2.b Bylaws. At or immediately prior to the Effective Date, the Board of Directors of Carolco shall repeal the Bylaws of Carolco as in effect immediately prior to the Effective Date and adopt new Bylaws ("Amended and Restated Bylaws of Carolco") substantially in the form attached hereto as Exhibit 2.2 and at and after the Effective Date, such Amended and Restated Bylaws of Carolco shall become the Bylaws of the Surviving Corporation, and shall continue in full force as the Bylaws of the Surviving Corporation until amended or repealed in accordance with the terms of the Bylaws and the Certificate of Incorporation of the Surviving Corporation and in accordance with applicable law. Section 2.c Board of Directors and Officers. At the Effective Date, the members of the Board of Directors of Carolco shall resign from their positions as and cease being directors of Carolco, and the persons named on Exhibit 2.3 shall become the directors of the Surviving Corporation, each of whom shall serve until the earlier of his resignation or removal or until his respective successor is duly elected and qualified in accordance with the terms of the Bylaws and the Certificate of Incorporation of the Surviving Corporation as then in effect and in accordance with applicable law. At the Effective Date, the officers of Carolco immediately prior to the Effective Date shall become the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified in accordance with the terms of the Bylaws and the Certificate of Incorporation of the Surviving Corporation as then in effect and in accordance with applicable law. ARTICLE 3 CHANGES AT LIVE AT OR BEFORE EFFECTIVE DATE Section 3.a Certificate of Incorporation. The Certificate of Incorporation of LIVE as in effect immediately prior to the Effective Date ("Restated Certificate of Incorporation of LIVE") shall be amended and, immediately before the Effective Date, the Restated Certificate of Incorporation of LIVE, as amended ("Amended and Restated Certificate of Incorporation of LIVE") substantially in the form attached hereto as Exhibit 3.1 shall be filed with the Secretary of State of the State of Delaware. At and after the Effective Date, the Amended and Restated Certificate of Incorporation of LIVE shall continue in full force as the Certificate of Incorporation of LIVE unless and until thereafter amended in accordance with its terms and applicable law. At the Effective Date, pursuant to the Amended and Restated Certificate of Incorporation of LIVE, the name of LIVE shall be changed to "Carolco Entertainment Inc." Section 3.b Bylaws. At or immediately prior to the Effective Date, the Board of Directors of LIVE shall repeal the Bylaws of LIVE as in effect immediately prior to the Effective Date and adopt new Bylaws ("Amended and Restated Bylaws of LIVE") substantially in the form attached hereto as Exhibit 3.2 and at and after the Effective Date, such Amended and Restated Bylaws of LIVE, shall continue in full force as the Bylaws of LIVE until amended or repealed in accordance with the terms of the Bylaws and the Certificate of Incorporation of LIVE and in accordance with applicable law. Section 3.c Board of Directors and Officers. At the Effective Date, the members of the board of directors of LIVE shall resign, seriatim, from their positions as and cease being directors of LIVE and as each such person resigns, the persons named on Exhibit 3.3A shall become, seriatim, the directors of LIVE and members of the committees of the board of directors of LIVE as indicated on Exhibit 3.3A, each of whom shall serve until the earlier of his resignation or removal or until his respective successor is duly elected and qualified in accordance with the terms of the Bylaws and the Certificate of Incorporation of LIVE as then in effect and in accordance with applicable law. At the Effective Date, the officers of LIVE immediately prior to the Effective Date shall resign from their positions as and cease being officers of LIVE, and the persons named on Exhibit 3.3B shall become the officers of LIVE until the earlier of their resignation or removal or until their respective successors are duly elected and qualified in accordance with the terms of the Bylaws and the Certificate of Incorporation of LIVE as then in effect and in accordance with applicable law. Section 3.d LIVE Home Video Inc. The Certificate of Incorporation of LIVE Home Video Inc., a Delaware corporation and a wholly-owned subsidiary of LIVE ("LHV"), as in effect immediately prior to the Effective Date shall continue in full force as the Certificate of Incorporation of LHV unless and until thereafter amended in accordance with its terms and applicable law. At or immediately prior to the Effective Date, the Board of Directors of LHV shall repeal the Bylaws of LHV as in effect immediately prior to the Effective Date and adopt new Bylaws substantially in the form attached hereto as Exhibit 3.4 (as amended, the "LHV Bylaws"), and at and after the Effective Date, such LHV Bylaws shall become the Bylaws of LHV, and shall continue in full force as the Bylaws of LHV until amended or repealed in accordance with their terms and the terms of the Certificate of Incorporation of LHV as then in effect and in accordance with applicable law. The Board of Directors of LHV shall not change in connection with the Merger and each member of the Board of Directors of LHV shall continue to serve until the earlier of his resignation or removal or until his respective successor is duly elected and qualified in accordance with the terms of the Bylaws and the Certificate of Incorporation of LHV as then in effect and in accordance with applicable law. ARTICLE 4 CONVERSION AND EXCHANGE OF SHARES AND CERTIFICATES Section 4.a Conversion. At the Effective Date, by virtue of the Merger and without any action on the part of any holder of any capital stock of Carolco, LIVE or CAC: (i) Conversion of Carolco Common Stock. (1) Subject to the provisions of clause (ii) of this Section 4.1(a), every 5.5 shares of Carolco Common Stock issued and outstanding immediately prior to the Effective Date (other than any such shares held in Carolco's treasury) shall be converted into one share of common stock of LIVE, par value $.01 per share ("LIVE Common Stock") (hereinafter the number of shares of Carolco Common Stock which shall be converted into one share of LIVE Common Stock shall be referred to as the "Exchange Ratio"). All such shares of Carolco Common Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and each holder of a Carolco Common Certificate (as defined in Section 4.2(a)) representing any such shares shall cease to have any rights with respect thereto, except as provided in Section 4.2. All shares of LIVE Common Stock to be received by holders of Carolco Common Stock upon conversion of such Carolco Common Stock pursuant to the Merger shall be duly authorized, validly issued and outstanding, fully paid and nonassessable, free of preemptive rights, and will not be liable to any further call, nor shall the holder thereof be liable for any further payments with respect thereto. Each share of Carolco Common Stock held in Carolco's treasury shall be cancelled and cease to exist at and after the Effective Date and no consideration shall be delivered with respect thereto. (2) If the Average Trading Price (as defined below) (A) is less than 54.5 cents per share, the Exchange Ratio shall not be 5.5 shares and instead shall be equal to the number obtained by dividing $3.00 by the Average Trading Price; provided, however, that in no event shall the Exchange Ratio exceed 6.5 shares; or (B) is greater than 72.7 cents per share, the Exchange Ratio shall not be 5.5 shares and instead shall be equal to the number obtained by dividing $4.00 by the Average Trading Price; provided, however, that in no event shall the Exchange Ratio decrease below 4.5 shares. For purposes of this Agreement: (i) "Average Trading Price" means the average Trading Price (as defined below) for the 20 consecutive Trading Days (as defined below) ending on a date that is three Trading Days prior to the date of the Carolco Stockholder Meeting and the LIVE Stockholder Meeting (or in the event the Carolco Stockholder Meeting and LIVE Stockholder Meeting are not on the same date, the date of the later Stockholder Meeting), or ending on such earlier date as may be required by the Securities and Exchange Commission, (ii) "Trading Price" means, on any day, the last reported sale price of one share of Carolco Common Stock regular way on the New York Stock Exchange or, if such security is not listed on the New York Stock Exchange, the last sale price of such security regular way, as reported in a composite published report of transactions which includes transactions on the exchange or other principal markets on which such security is traded or, if there is no such composite report as to any day, the last reported sale price, regular way (or if there is no such reported sale on such day, the average of the closing reported bid and asked prices) on the principal United States securities trading market (whether a stock exchange, National Association of Securities Dealers Automated Quotation System or otherwise) on which such security is traded, and (iii) "Trading Day" means a day on which the New York Stock Exchange is open for at least one-half of its normal business hours. (3) Stockholders of Carolco entitled to receive a fractional share of LIVE Common Stock upon the conversion of the Carolco Common Stock shall receive in lieu thereof cash in an amount equal to the Average Trading Price times the number of shares of Carolco Common Stock not converted (which number shall be less than the Exchange Ratio). All checks issued in payment for fractional interests shall be denominated in U.S. dollars and drawn on a United States bank. (ii) Conversion of Carolco Preferred Stock. Each share of Series A Convertible Preferred Stock of Carolco, par value $1.00 ("Carolco Series A Preferred Stock"), issued and outstanding immediately prior to the Effective Date shall be converted into one share of Series D Convertible Preferred Stock of LIVE, par value $1.00 ("LIVE Series D Preferred Stock"), the statement of designations, rights, preferences and powers of which is included in Exhibit 3.1. All such shares of Carolco Series A Preferred Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except as provided in Section 4.2. All shares of the LIVE Series D Preferred Stock to be received by holders of Carolco Series A Preferred Stock upon conversion of such Carolco Series A Preferred Stock pursuant to the Merger shall be duly authorized, validly issued and outstanding, fully paid and nonassessable, free of preemptive rights, and will not be liable to any further call, nor shall the holder thereof be liable for any further payment with respect thereto. (iii) LIVE Stock and CAC Stock. Each Share of LIVE Common Stock issued and outstanding immediately prior to the Effective Date shall remain unchanged by virtue of the Merger. Each Share of Series C Convertible Preferred Stock of LIVE, par value $1.00 ("LIVE Series C Preferred Stock") shall remain unchanged except as the Amended Certificate of Designations, Preferences and Rights of LIVE Series C Preferred Stock ("Series C Certificate of Designations") shall be amended by the Amended and Restated Certificate of Incorporation of LIVE to be filed as provided herein. Each Share of common stock of CAC, par value $0.01 per share ("CAC Common Stock") issued and outstanding immediately prior to the Effective Date shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation. Section 4.b LIVE to Make Certificates Available. (i) Exchange of Common Stock Certificates. Prior to the Effective Date, LIVE shall authorize American Stock Transfer & Trust Company (or such other person or persons as shall be acceptable to LIVE and Carolco) to act as Exchange Agent hereunder (the "Exchange Agent"). At or prior to the Effective Date, LIVE shall deposit with the Exchange Agent in trust for the holders of certificates which immediately prior to the Effective Date represented shares of Carolco Common Stock (the "Carolco Common Certificates"), and, subject to Section 4.3, each such holder will be entitled to receive, upon surrender to the Exchange Agent in the manner set forth in subsection (d) below of one or more Carolco Common Certificates for cancellation, certificates representing the number of shares of LIVE Common Stock into which the shares represented by such Carolco Common Certificates were converted in the Merger. LIVE Common Stock into which Carolco Common Stock shall be converted in the Merger shall be deemed to have been issued at the Effective Date, and Carolco Common Certificates shall, at and after the Effective Date, be deemed to represent only the right to receive, upon surrender of such Carolco Common Certificates, the certificates contemplated by the preceding sentence. (ii) Exchange of Series A Certificates. At or prior to the Effective Date, LIVE shall deposit with the Exchange Agent in trust for the holders of certificates which immediately prior to the Effective Date represented shares of Carolco Series A Preferred Stock ("Series A Certificates"), and, subject to Section 4.3, each such holder will be entitled to receive, upon surrender to the Exchange Agent in the manner set forth in subsection (d) below of one or more Series A Certificates for cancellation, certificates representing the number of shares of LIVE Series D Preferred Stock into which the shares represented by such Series A Certificates were converted in the Merger. LIVE Series D Preferred Stock into which Carolco Series A Preferred Stock shall be converted in the Merger shall be deemed to exist as of the Effective Date, and Series A Certificates shall, at and after the Effective Date, be deemed to represent only the right to receive, upon surrender of such Series A Certificates, the certificates contemplated by the preceding sentence. (iii) Exchange of Old LIVE Certificates. At or prior to the Effective Date, LIVE shall deposit with the Exchange Agent in trust for the holders of certificates which immediately prior to the Effective Date represented shares of LIVE Common Stock or LIVE Series C Preferred Stock or of certificates which immediately prior to the Effective Date represented Contingent Payment Rights (as defined in Section 5.3) (collectively, "Old LIVE Certificates"), and, subject to Section 4.3, each such holder will be entitled to receive, upon surrender to the Exchange Agent in the manner set forth in subsection (d) below of one or more Old LIVE Certificates for cancellation, certificates representing the number of shares of LIVE Common Stock or LIVE Series C Preferred Stock or Contingent Payment Rights (reflecting the change of LIVE's name at the Effective Date), equal to the number of shares or rights represented by the Old LIVE Certificates so exchanged ("New LIVE Certificates"). Notwithstanding the foregoing, at and after the Effective Date, until the holder of an Old LIVE Certificate surrenders such Old LIVE Certificate to the Exchange Agent for cancellation in the manner set forth in subsection (d) below, each Old LIVE Certificate shall continue to represent the same number of shares of LIVE Common Stock, LIVE Series C Preferred Stock or Contingent Payment Rights as such Old LIVE Certificate represented immediately prior to the Effective Date. (iv) Exchange Procedures. As soon as practicable after the Effective Date, but in any event no later than five business days thereafter, the Exchange Agent shall mail to each holder of record (at such address as appears on the books of LIVE or Carolco or as such holder shall otherwise designate) of a Carolco Common Certificate, a Series A Certificate and/or an Old LIVE Certificate, as the case may be (any such certificates are sometimes referred to hereinafter individually as a "Certificate," and collectively as "Certificates"), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass, only upon actual delivery of such Certificates to the Exchange Agent and shall be in such form and have such other provisions as LIVE and Carolco shall mutually specify, including procedures to be followed in the event a holder has lost his certificates) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of LIVE Common Stock and/or LIVE Series D Preferred Stock and/or for New LIVE Certificates (the "Mailing"). Upon surrender of such a Certificate for cancellation to the Exchange Agent, at the offices of the Exchange Agent and as otherwise specified in the transmittal letter from the Exchange Agent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of LIVE Common Stock, or that number of whole shares of LIVE Series D Preferred Stock, which such holder has the right to receive pursuant to this Article 4, or New LIVE Certificates in accordance with the provisions of Section 4.2(c), and the Certificate so surrendered shall be cancelled. Section 4.c Dividends; Transfer Taxes. (i) Dividends. No dividends or other distributions, if any, that are declared on or after the Effective Date on LIVE Common Stock (other than LIVE Common Stock represented by an Old LIVE Certificate) or LIVE Series D Preferred Stock or are payable to the holders of record thereof will be paid with respect to shares of such LIVE Common Stock (other than LIVE Common Stock represented by an Old LIVE Certificate) or LIVE Series D Preferred Stock, until the holders thereof surrender their Carolco Common Certificates or Series A Certificates, as applicable, as provided in Section 4.2. Nothing in this Agreement shall require holders of Old LIVE Certificates to surrender such Old LIVE Certificates, as permitted in Section 4.2, as a condition to receipt of any dividend or other distribution, if any, payable to such holder with respect to shares of LIVE Common Stock, LIVE Series C Preferred Stock or Contingent Payment Rights represented by such Old LIVE Certificate. Subject to the effect of any applicable laws, there shall be paid to such record holder of the certificates representing such LIVE Common Stock or LIVE Series D Preferred Stock at the time of such surrender, if required, or the appropriate payment date, if later, or as promptly as practicable thereafter, the amount of any dividends or other distributions theretofore paid with respect to whole shares of such LIVE Common Stock or LIVE Series D Preferred Stock and having a record date on or after the Effective Date. In no event shall the person entitled to receive any such dividends or other distributions be entitled to receive interest on such dividends or other distributions. (ii) Transfer Taxes. No transfer taxes shall be payable by a (i) holder of Carolco Common Stock or Carolco Series A Preferred Stock in connection with such holder's receipt of shares of LIVE Common Stock or LIVE Series D Preferred Stock, as the case may be, upon surrender of a Carolco Common Certificate or Series A Certificate or (ii) holder of LIVE Common Stock, LIVE Series C Preferred Stock or Contingent Payment Rights in connection with such holder's exchange of an Old LIVE Certificate for a New LIVE Certificate, except in any event if any certificate representing shares of LIVE Common Stock, LIVE Preferred Stock or Contingent Payment Rights is to be paid to or issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer (including any signature guarantees necessary) and that the person requesting such exchange shall pay to the Exchange Agent any transfer or other taxes required by reason of the issuance of certificates for such shares of LIVE Common Stock or LIVE Preferred Stock in a name other than that of the registered holder of the Carolco Common Certificate, Series A Certificate, or Old LIVE Certificate surrendered, or shall establish to the satisfaction of the Exchange Agent or LIVE, as appropriate, that such tax has been paid or is not applicable. For purposes of this Agreement, "LIVE Preferred Stock" means, collectively, the LIVE Series C Preferred Stock and the LIVE Series D Preferred Stock. (iii) Delay in Delivery. Any certificates delivered to the Exchange Agent by LIVE pursuant to Sections 4.2(a) or 4.2(b) representing shares of LIVE Common Stock or LIVE Series D Preferred Stock (or any dividends or distributions thereon) which remain undistributed to the previous stockholders of Carolco for six months after the date of the Mailing (as defined above in Section 4.2(e)) shall be returned to LIVE, upon demand. Any persons who were previously stockholders of Carolco who have not theretofore complied with this Article 4 shall thereafter look only to LIVE (subject to abandoned property, escheat and other similar laws) for payment of their claim for LIVE Common Stock or LIVE Series D Preferred Stock (or any dividends or distributions thereon). Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto shall be liable to a holder of a Carolco Common Certificate or Series A Certificate for any shares of LIVE Common Stock or LIVE Series D Preferred Stock (or any dividends or distributions thereon) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 4.d No Further Ownership Rights in Carolco Common Stock. All shares of LIVE Common Stock or LIVE Series D Preferred Stock issued upon the surrender for exchange of shares of Carolco Common Stock or Carolco Series A Preferred Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Carolco Common Stock or Carolco Series A Preferred Stock, subject, however, to the Surviving Corporation's obligation to pay any dividends or make any other distribution with a record date prior to the Effective Date which may have been declared or made by Carolco on such shares of Carolco Common Stock or Carolco Series A Preferred Stock in accordance with the terms of this Agreement. Section 4.e Closing of Carolco Transfer Books. Upon the Effective Date, the stock transfer books of Carolco shall be closed and no transfer of Carolco Common Stock or Carolco Preferred Stock shall thereafter be made. If, after the Effective Date, Certificates are presented to the Surviving Corporation, they shall be cancelled and exchanged as provided in this Article 4. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF LIVE LIVE represents and warrants to Carolco as follows: Section 5.a Organization, Standing and Power. (i) LIVE is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own its property and carry on its business as now being conducted. LIVE and each of its Subsidiaries is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on LIVE. (ii) For purposes of this Agreement (i) "Material Adverse Change" or "Material Adverse Effect" means, when used with respect to LIVE or Carolco, as the case may be, any change or effect that is or may be materially adverse to the assets, properties, business, condition (financial or otherwise) or results of operations of LIVE and its Subsidiaries taken as a whole or Carolco and its Subsidiaries taken as a whole, as the case may be, and (ii) "Subsidiary" means any corporation or other legal entity of which LIVE or Carolco, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50% or more of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity, or otherwise directly or indirectly controls the operations of such corporation or other legal entity, except that in the case of LIVE, Subsidiaries shall not include Strawberries, Inc. ("Strawberries") or VCL/Carolco Communications GmbH ("VCL"), or any subsidiaries of Strawberries or VCL. (iii) LIVE has disclosed to Carolco in writing all information regarding Strawberries and/or VCL (i) which should have been disclosed in the LIVE LETTER had Strawberries and/or VCL been included within the definition of "Subsidiary" in Section 5.1(b) hereof and (ii) which, individually or in the aggregate, has, had or could reasonably be expected to have a Material Adverse Effect on LIVE or the Surviving Corporation. Section 5.b Subsidiaries. LIVE has delivered to Carolco a disclosure letter of even date herewith (together with the exhibits included as a part thereof, the "LIVE LETTER") which lists, among other things, each Subsidiary of LIVE. All the outstanding shares of capital stock or other ownership interests of each such Subsidiary have been duly authorized, validly issued and are fully paid and nonassessable and are, except as set forth in the LIVE LETTER, owned by LIVE, by another Subsidiary of LIVE or by LIVE and another such Subsidiary, free and clear of all liens, charges, claims and encumbrances except as set forth in the LIVE LETTER. Except as set forth in the LIVE LETTER, there are no outstanding options, rights or agreements of any kind relating to the issuance, sale or transfer of any capital stock or other equity securities or ownership interests of any such Subsidiary of LIVE to any person. Each Subsidiary of LIVE (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has the requisite corporate power and authority to own its properties and carry on its business as now being conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on LIVE. Except for the capital stock of its Subsidiaries and except as disclosed in LIVE's Annual Report on Form 10-K for the year ended December 31, 1993, and in LIVE's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, LIVE does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership or other entity which is material to LIVE. Section 5.c Capital Structure and Commitments. As of the date hereof, the authorized capital stock of LIVE consists of 120,000,000 shares of LIVE Common Stock, 15,000,000 shares of LIVE Series A Common Stock, par value $.01 per share ("LIVE Series A Common Stock") (none of which LIVE Series A Common Stock is issued and outstanding) and 15,000,000 shares of LIVE preferred stock (of the authorized LIVE preferred stock, 9,000,000 shares have been designated as LIVE Series B Cumulative Convertible Preferred Stock ("LIVE Series B Preferred Stock") (which LIVE Series B Preferred Stock shall be redeemed as provided in Section 10.2(e) herein), 15,000 shares have been designated as LIVE Series C Preferred Stock and 500,000 shares have been designated as LIVE Series R Junior Participating Cumulative Preferred Stock ("LIVE Series R Preferred Stock") (none of which LIVE Series R Preferred Stock is issued and outstanding)). As of the date hereof, each share of LIVE Common Stock outstanding includes a LIVE Right (which LIVE Right shall be terminated as provided in Section 9.17 herein). For purposes of this Agreement, a "LIVE Right" is a right to purchase LIVE Common Stock pursuant to the Rights Agreement (the "LIVE Rights Agreement") dated as of July 19, 1990, as amended, between LIVE and American Stock Transfer and Trust Company, as Rights Agent. As of the date of this Agreement: (i) approximately 12,000,000 shares of LIVE Common Stock are duly authorized, validly issued and outstanding, fully paid and nonassessable, (ii) approximately 1,900,000 shares of LIVE Common Stock are reserved for issuance upon the exercise of outstanding options to purchase LIVE Common Stock, which options are listed in Exhibit 5.3A, (iii) approximately 2,400,000 shares of LIVE Common Stock are reserved for issuance upon the exercise of warrants issued under the warrant agreements listed in Exhibit 5.3A, (iv) approximately 6,000,000 shares of LIVE Series B Preferred Stock are duly authorized, issued and outstanding, fully paid and nonassessable, (v) 15,000 shares of LIVE Series C Preferred Stock are duly authorized, issued and outstanding, fully paid and nonassessable, (vi) up to 60,000,000 shares of LIVE Common Stock are reserved for issuance upon conversion of the LIVE Series B Preferred Stock, and (vii) approximately 5,100,000 shares of LIVE Common Stock are reserved for issuance upon conversion of the LIVE Series C Preferred Stock. As of the date of this Agreement, except for this Agreement, the stock options referred to in clause (b) of this Section 5.3 and listed on Exhibit 5.3A, the warrant agreements referred to in clause (c) of this Section 5.3 and listed on Exhibit 5.3A, the Contingent Payment Rights issued in connection with the acquisition by LIVE of certain of the assets of Vestron Inc. in July 1991 ("Contingent Payment Rights"), the shares of LIVE Common Stock underlying the LIVE Series B Preferred Stock and the LIVE Series C Preferred Stock, the shares of LIVE Series A Common Stock underlying the LIVE Series C Preferred Stock, the LIVE Rights, and other agreements and transactions relating to capital stock described in the LIVE SEC Documents or in the LIVE LETTER, there are no options, warrants, rights, contracts, commitments, agreements, arrangements or undertakings of any kind to which LIVE or any of its Subsidiaries is a party or by which any of them is bound relating to the issuance of any capital stock or other voting securities of LIVE or of any of its Subsidiaries or any securities convertible into or exchangeable for any capital stock or other voting securities of LIVE or of any of its Subsidiaries, or any options, warrants or other rights to purchase capital stock or other voting securities of LIVE or any of its Subsidiaries, nor has LIVE or any of its Subsidiaries granted any stock appreciation rights to any person or entity. As of March 31, 1994, there are approximately 1,281 holders of record of LIVE Common Stock, approximately 281 holders of record of LIVE Series B Preferred Stock and one (1) holder of record of LIVE Series C Preferred Stock. Exhibit 5.3B lists all agreements of LIVE as of the date hereof by which LIVE may be required to register any of its securities ("LIVE Registration Rights Agreements"). Section 5.d Authority; Non-Contravention. (i) Each of LIVE and CAC has all requisite corporate power and authority to enter into and execute this Agreement and, subject to any approval by the stockholders of LIVE of the Merger and the related amendments to the Restated Certificate of Incorporation of LIVE, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by LIVE and CAC, the performance by LIVE and CAC of their respective obligations hereunder and the consummation by LIVE and CAC of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of LIVE and CAC, except for the approval of LIVE's stockholders, which will be solicited in accordance with the provisions of Section 9.1 hereof, and no other act or proceeding on the part of LIVE or CAC is necessary to authorize the execution, delivery and consummation of this Agreement or the transactions contemplated hereby. (ii) The Board of Directors of LIVE has received the opinion of Chemical Securities Inc. ("Chemical"), the financial advisor to the Board, dated July 1, 1994, to the effect that in Chemical's opinion the financial terms of the Merger are fair, from a financial point of view, to the holders of LIVE Common Stock, other than the LIVE Investors (as defined below). A true, correct and complete copy of such opinion (the "Chemical Fairness Opinion") has been delivered to Carolco. For purposes of this Agreement, "LIVE Investors" means, collectively, Pioneer, Cinepole, and RCS, where "Pioneer" refers to Pioneer LDCA, Inc., "Cinepole" refers to Cinepole Productions B.V. and "RCS" refers, collectively, to RCS International Communications N.V. and RCS Video International Services B.V. (iii) LIVE has received a letter agreement (the "Investor Representation Agreement") from each LIVE Investor and each such Investor Representation Agreement, substantially in the form of Exhibit 5.4(c) hereto, has been executed by such LIVE Investor. (iv) This Agreement has been duly and validly executed and delivered by each of LIVE and CAC and (assuming the valid authorization, execution and delivery of this Agreement by Carolco) constitutes a valid and binding obligation of each of LIVE and CAC enforceable against LIVE and CAC in accordance with its terms, except (i) as their respective obligations may be affected by bankruptcy, insolvency, reorganization, moratorium or similar laws, or by equitable principles relating to or limiting creditors' rights generally, and (ii) that the remedies of specific performance, injunction and other forms of equitable relief are subject to certain tests of equity jurisdiction, equitable defenses and the discretion of the court before which any proceeding therefor may be brought. (v) The Board of Directors of LIVE has approved the terms of this Agreement and of the transactions contemplated hereby, and the Advisory Committee of the Board of Directors of LIVE (the "Advisory Committee") has approved and declared advisable and in the best interests of LIVE and its stockholders the Merger, upon the terms and subject to the conditions herein; the Special Committee (the "LIVE Special Committee") formed pursuant to and in accordance with Section 3.6 of the Certificate of Designations, Preferences and Relative, Participating, Optional or other Special Rights of the Series B Preferred Stock of LIVE has approved the terms of this Agreement and of the transactions contemplated hereby. (vi) Except as set forth in the LIVE LETTER, the execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not, breach, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or result in or give rise to a right of termination, cancellation or acceleration of any liability or obligation or to the loss of a material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of LIVE or any of its Subsidiaries under, any provision of (i) the Restated Certificate of Incorporation of LIVE or Bylaws of LIVE (true and complete copies of which as of the date hereof have been delivered to Carolco) or any provision of the comparable charter or organizational documents of any of its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to LIVE or any of its Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, injunction, writ, or authorization, consent, approval, rule or regulation of any court or governmental authority applicable to LIVE or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses (ii) or (iii), any such conflicts, violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not (A) have a Material Adverse Effect on LIVE, (B) materially impair the ability of LIVE or CAC to perform their respective obligations hereunder or (C) prevent the consummation of any of the transactions contemplated hereby. The redemption of the LIVE Series B Preferred Stock as contemplated in Section 10.2(c) herein and the termination of the LIVE Rights as contemplated in Section 9.17 herein shall have complied with, and shall not have resulted in a violation of, either the Certificate of Designations, Preferences and Rights governing the LIVE Series B Preferred Stock or the LIVE Rights Agreement, respectively, or any applicable securities laws. (vii) No filing or registration with, or authorization, consent or approval of, any domestic (federal and state), foreign or international court, commission, governmental body, regulatory agency, authority or tribunal (a "Governmental Entity") is required by or with respect to LIVE or any of its Subsidiaries in connection with the execution and delivery of this Agreement by LIVE or is necessary for the consummation by LIVE of the Merger or the other transactions contemplated by this Agreement, except (i) in connection, or in compliance with, the provisions of the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act") and the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the "Exchange Act"), (ii) in connection with, or in compliance with, the provisions of the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which LIVE is qualified to do business, (iv) the amendments to the Restated Certificate of Incorporation of LIVE as provided in Section 3.1, (v) any required filings under state securities or "blue sky" laws and (vi) filings, registrations, authorizations, consents or approvals which if not made or obtained would have a Material Adverse Effect on LIVE or would prevent or materially adversely affect the transactions contemplated hereby. Section 5.e LIVE SEC Documents. LIVE has filed all required reports, statements, forms and documents with the SEC that LIVE was required to file during the three-year period immediately preceding the date hereof (the "LIVE SEC Documents"). As of their respective dates, and as subsequently revised, amended or superseded by later-filed LIVE SEC Documents through and including the date of this Agreement, the LIVE SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and as so revised, superseded or amended none of the LIVE SEC Documents including the financial information contained therein contained or currently contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of LIVE included in the LIVE SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of the unaudited statements, as permitted by Regulation S-X promulgated by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present the consolidated financial position of LIVE and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and statements of cash flows for the periods included therein (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). Notwithstanding the foregoing, LIVE makes no representation or warranty in this Agreement regarding any information (including financial information and financial statements) supplied by Carolco for inclusion in the LIVE SEC Documents. Section 5.f No Material Adverse Change. Except as set forth in the LIVE LETTER, since the date of the most recent balance sheet and notes to consolidated financial statements contained in LIVE's Annual Report on Form 10-K for the year ended December 31, 1993, or LIVE's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, as filed with the SEC (the "LIVE Balance Sheet"), there has been no Material Adverse Change in LIVE, and neither LIVE nor any of its Subsidiaries knows of any such Material Adverse Change that is threatened, nor has there been any damage, destruction or loss affecting the assets, properties, business, operations or condition (financial or otherwise) of LIVE or any of its Subsidiaries, whether or not covered by insurance, which would have a Material Adverse Effect on LIVE, and which has not been subsequently reported in any of the LIVE SEC Documents filed with the SEC prior to the date hereof. Section 5.g Absence of Undisclosed Liabilities. Except as set forth in the LIVE SEC Documents or the LIVE LETTER, as of the date of the LIVE Balance Sheet neither LIVE nor any of its Subsidiaries had any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be set forth on a financial statement or in the notes thereto and which, individually or in the aggregate, would have a Material Adverse Effect on LIVE, which were not set forth on the LIVE Balance Sheet. Section 5.h Absence of Certain Events. Except as disclosed in the LIVE SEC Documents or the LIVE LETTER, since the date of the LIVE Balance Sheet, LIVE and its Subsidiaries have conducted their business only in the ordinary course. Section 5.i No Solicitation. LIVE is not now engaged in any activities, discussions or negotiations with any parties (other than Carolco) in respect of a "takeover proposal" or an "offer" (both as defined in Section 8.3), except with respect to Strawberries and VCL. Section 5.j Registration Statement and Proxy Statement. None of the information to be supplied by LIVE or CAC for inclusion or incorporation by reference in the registration statement on Form S-4 under the Securities Act to be filed with the SEC pursuant to Section 9.2 (the "Registration Statement"), or the joint proxy statement/prospectus together with any amendments or supplements thereto included within the Registration Statement (the "Proxy Statement") will (a) in the case of the Registration Statement, at the time it becomes effective, contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading, or (b) in the case of the Proxy Statement, at the time of the mailing of the Proxy Statement and at the times of the Stockholder Meetings, contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading. The Registration Statement will comply (with respect to LIVE and CAC) as to form in all material respects with the provisions of the Securities Act and the Proxy Statement will comply (with respect to LIVE and CAC) as to form in all material respects with the provisions of the Exchange Act. Notwithstanding the foregoing, neither LIVE nor CAC, individually or collectively, makes any representation or warranty regarding any information (including financial information and financial statements) supplied by Carolco for inclusion in the Registration Statement or the Proxy Statement. Section 5.k Reorganization. Neither LIVE nor any of its Subsidiaries has taken any action or failed to take any action which action or failure to take action would jeopardize the qualification of the Merger as a tax free reorganization under the Code. Section 5.l Litigation. Except as set forth in the LIVE LETTER or the LIVE SEC Documents, as of the date hereof, there is no claim, suit, action or proceeding pending or, to the knowledge of LIVE, threatened against or affecting LIVE or any of its Subsidiaries (whether or not covered by insurance) which (i) could reasonably be expected to have a Material Adverse Effect on LIVE (and LIVE is not aware of any reasonable basis for any such suit, action or proceeding), or (ii) challenge the transactions contemplated hereby at law or in equity or before or by any federal, state, local, foreign or other governmental department, commission, board, agency, instrumentality, or authority; nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against LIVE or any of its Subsidiaries having, or which, insofar as reasonably can be foreseen, in the future would have, any such effect. Section 5.m Loan Agreements, Customers and Suppliers. (i) Neither LIVE nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease instrument, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on LIVE or except as are set forth in the LIVE LETTER. Set forth in the LIVE LETTER is a list of each loan or credit agreement, note, bond, mortgage, indenture and other agreement and instrument pursuant to which any indebtedness of LIVE or any of its Subsidiaries (other than indebtedness solely among or between LIVE and/or any of its Subsidiaries), in an aggregate principal amount in excess of $3,000,000 is outstanding or may be incurred and the respective principal amounts currently outstanding thereunder. For purposes of this Agreement, "indebtedness" shall mean, with respect to any person, without duplication, (i) any liability, contingent or otherwise, (x) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of the person or only to a portion thereof), (y) evidenced by a note, debenture or similar instrument (including a purchase money obligation), or (z) for the payment of money relating to a capitalized lease obligation; (ii) any liability of others of the kind described in the preceding clause which the person has guaranteed or which is otherwise its legal liability; (iii) any obligation secured by a lien to which the property or assets of the person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be the person's legal liability, and (iv) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (i), (ii) or (iii). (ii) Neither LIVE nor any of its Subsidiaries is in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such a violation of or default under) any material agreement with any of its customers or suppliers of products or services which are of material importance to LIVE or any of its Subsidiaries, and no such customer or supplier, to the knowledge of LIVE or any of its Subsidiaries, is in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such customer or supplier to be in violation of or default under) any of such material agreements or except as are set forth in the LIVE LETTER. Section 5.n Permits. LIVE and each of its Subsidiaries possess all franchises, permits, licenses, certificates, approvals or other authorizations necessary to own or lease and operate their properties and to conduct their businesses, except for incidental franchises, permits, licenses, certificates, approvals and other authorizations that would be readily obtainable by any qualified applicant without undue burden in the event of any lapse, termination, cancellation or forfeiture or which if not obtained would not, in the aggregate, have a Material Adverse Effect on LIVE. Section 5.o Absence of Changes in LIVE Benefit Plans. Except as disclosed in the LIVE SEC Documents or the LIVE LETTER, since the date of the most recent audited financial statements included in the LIVE SEC Documents, there has not been any adoption or amendment by LIVE or any of its Subsidiaries of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical fringe benefit or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee or director of, or any other person providing services to, LIVE or any of its Subsidiaries (collectively, "LIVE Benefit Plans") which will have a Material Adverse Effect on LIVE. LIVE has delivered to Carolco true, correct and complete copies of all LIVE Benefit Plans. Each of the LIVE Benefit Plans is in material compliance with all applicable laws including the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code. Section 5.p Intellectual Property. LIVE and its Subsidiaries own, or are licensed or otherwise have the right to use, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (collectively, the "LIVE Proprietary Rights") which are material to the conduct of the business of LIVE and its Subsidiaries taken as a whole. No claims are pending or, to the knowledge of LIVE, threatened that LIVE or any Subsidiary is infringing or otherwise adversely affecting the rights of any person with regard to any LIVE Proprietary Right, except for such claims or threats which could not reasonably be expected to have a Material Adverse Effect on LIVE. To the knowledge of LIVE, no person is infringing the rights of LIVE with respect to any LIVE Proprietary Right that would have a Material Adverse Effect on LIVE. No lien, encumbrance or restriction with respect to any LIVE Proprietary Right has a Material Adverse Effect on LIVE, or so far as LIVE can now foresee could reasonably be expected to have a Material Adverse Effect on LIVE. Section 5.q Environmental Matters. To the knowledge of LIVE, LIVE and each of its Subsidiaries are in compliance with all applicable federal, state, regional and local laws, statutes, ordinances, judgments, rulings and regulations relating to any matters of pollution, protection of the environment or environmental regulation or control (collectively, "Environmental Laws"), except for violations of the Environmental Laws that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on LIVE. Section 5.r Taxes. Except as set forth in the LIVE LETTER or the LIVE SEC Documents: (a) each of LIVE and its Subsidiaries has timely filed all federal, state, local or foreign tax returns required to be filed by it (except for all such returns the failure of which timely filing would, individually or in the aggregate, not have a Material Adverse Effect on LIVE), and has paid (or LIVE has paid on its behalf) all taxes shown as due on the returns in respect of the periods covered by such returns; (b) there are no tax liens upon any property or assets of LIVE or any of its Subsidiaries which would have a Material Adverse Effect on LIVE, except liens for current taxes not yet due; (c) neither LIVE nor any of its Subsidiaries is delinquent in the payment of any material tax, assessment or governmental charge which would have a Material Adverse Effect on LIVE; (d) no deficiencies for any taxes have been proposed, asserted or assessed against LIVE or any of its Subsidiaries which would have a Material Adverse Effect on LIVE or its Subsidiaries, and no requests for waivers of the time to assess any such taxes are pending; and (e) no audits of the tax returns of LIVE or any of its Subsidiaries are currently being conducted by a taxing authority and neither LIVE nor its Subsidiaries have received any notices of pending or proposed audits from a taxing authority. Section 5.s Foreign Corrupt Practices Act. To the best knowledge of the officers of LIVE, neither LIVE, any Subsidiary of LIVE nor any director, officer, agent, employee or other person associated with or acting on behalf of any of them has (i) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment or made any unlawful expenditures relating to political activity, or made any direct or indirect unlawful payments to governmental officials or others or established or maintained any unlawful or unrecorded funds in violation of Section 30A of the Exchange Act or (ii) accepted or received any unlawful contributions, payments, gifts or expenditures. LIVE is in compliance in all material respects with the provisions of Section 13(b) of the Exchange Act and to the best knowledge of the officers of LIVE, there is no failure of compliance with such provisions. Section 5.t Brokers. No broker, investment banker or other person, other than Chemical or Jefferson Capital Corporation, the fees and expenses of which will be paid by LIVE in accordance with LIVE's written agreements with Chemical and Jefferson Capital Corporation (copies of which have been delivered by LIVE to Carolco prior to the date hereof), is entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of LIVE, any Subsidiary of LIVE or CAC. Section 5.u Officers, Directors and Key Employees. The LIVE LETTER sets forth (i) the name and total compensation of each officer and director of LIVE; (ii) the name of each officer and director of any of LIVE's Subsidiaries; (iii) the name and total compensation of each other officer, director, employee, consultant, agent or other representative of LIVE or any of its Subsidiaries whose current annual rate of compensation (including bonuses and commissions) exceeds $150,000; (iv) all wage or salary increases or bonuses received by the persons identified in Section 5.21(i) and (iii) ("Significant LIVE Employees") since December 31, 1993, and any accrual for or commitment or agreement by LIVE or any of its Subsidiaries to pay such increases or bonuses; and (v) a notation with respect to each of such Significant LIVE Employees, whether they have an employment agreement with LIVE or any of its Subsidiaries and, if so, the date and term of such agreement. Except as set forth in the LIVE LETTER, (x) to the knowledge of LIVE or any of its Subsidiaries, none of such Significant LIVE Employees has made a threat to LIVE or any of its Subsidiaries or to any of their officers or directors to cancel or otherwise terminate such Significant LIVE Employee's relationship with LIVE or any of its Subsidiaries and (y) none of such Significant LIVE Employees have "change of control" clauses or agreements with LIVE or any of its Subsidiaries (or similar clauses or agreements permitting such Significant LIVE Employees to terminate their employment relationship with LIVE or any of its Subsidiaries) that would be triggered by the Merger which have not been waived on the date hereof. Section 5.v State Takeover Statutes. Neither Section 203 of the DGCL nor any other "fair price," "moratorium," "control share acquisition" or other state takeover statute or similar statute or regulation applies to the Merger by virtue of LIVE and CAC engaging in the transactions contemplated hereby. Section 5.w Insurance. LIVE and each of its Subsidiaries have been and are insured by financially sound and reputable insurers with respect to their properties and the conduct of their business in such amounts and against such risks as are reasonable in relation to their respective businesses, and each will use its best efforts to maintain such insurance. Such insurance is in full force and effect and no notice of cancellation or termination has been received with respect to any of said insurance. Except as disclosed in the LIVE LETTER, there are no claims pending thereunder except where such claim would not, individually or in the aggregate, have a Material Adverse Effect on LIVE. Section 5.x Title to Properties and Related Matters. Except with respect to the LIVE Proprietary Rights, LIVE and each of its Subsidiaries have good and marketable title (or valid and subsisting leasehold interests) to all of the personal properties and assets (tangible and intangible) and the real properties utilized in their businesses or reflected in the LIVE SEC Documents or acquired after the date thereof (other than properties sold or otherwise disposed of in the ordinary course of business), which are material to them, free and clear of all title defects, liens, encumbrances and restrictions, except (i) as reflected in the LIVE SEC Documents, (ii) to the extent not described in clause (i), those described in the LIVE LETTER, (iii) to the extent not described in clause (i), statutory liens not yet due or delinquent or the validity of which are being contested or litigated in good faith by appropriate proceedings and for which LIVE has set aside on its books reserves that are adequate with respect thereto; and (iv) liens, encumbrances, covenants, rights of way, building or use restrictions, easements, exceptions, variances, reservations and other matters or limitations of any kind, if any, which, when considered together with the liens described in clauses (i), (ii) and (iii), do not have a Material Adverse Effect on LIVE's business or operations. All properties of LIVE and each of its Subsidiaries are reflected in the LIVE SEC Documents in the manner and to the extent required by generally accepted accounting principles consistently applied. Neither the whole nor any portion of the leaseholds or any other assets of LIVE or any of its Subsidiaries is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor to the knowledge of LIVE or any of its Subsidiaries has any such condemnation, expropriation or taking been proposed, which would have a Material Adverse Effect on LIVE and its Subsidiaries taken as a whole. Section 5.y Accuracy of LIVE Disclosure. Neither this Agreement, nor any document or other paper furnished (or to be furnished pursuant hereto at the Closing) by or on behalf of LIVE or CAC to Carolco pursuant to this Agreement or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made, in the context in which made, not false or misleading. There is no fact that LIVE has not disclosed to Carolco in writing that has a Material Adverse Effect on LIVE, or so far as LIVE can now foresee will have a Material Adverse Effect on LIVE or on the ability of LIVE to perform this Agreement. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF CAROLCO Carolco represents and warrants to LIVE and CAC as follows: Section 6.a Organization, Standing and Power. Carolco is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own its property and carry on its business as now being conducted. Carolco and each of its Subsidiaries is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on Carolco. Section 6.b Subsidiaries. Carolco has delivered to LIVE a disclosure letter of even date herewith (together with the exhibits included as a part thereof, the "CAROLCO LETTER") which lists, among other things, each Subsidiary of Carolco. All the outstanding shares of capital stock of each such Subsidiary have been duly authorized, validly issued and are fully paid and nonassessable and are, except as set forth in the CAROLCO LETTER, owned by Carolco, by another Subsidiary of Carolco or by Carolco and another such Subsidiary, free and clear of all liens, charges, claims and encumbrances. Except as set forth in the CAROLCO LETTER, there are no outstanding options, rights or agreements of any kind relating to the issuance, sale or transfer of any capital stock or other equity securities or ownership interests of any such Subsidiary of Carolco to any person. Each Subsidiary of Carolco (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has the requisite corporate power and authority to own its properties and carry on its business as now being conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification necessary, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on Carolco. Except for the capital stock of its Subsidiaries and except as disclosed in Carolco's Annual Report on Form 10-K for the year ended December 31, 1993 and Carolco's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, Carolco does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership or other entity which is material to Carolco. Section 6.c Capital Structure and Commitments. As of the date hereof, the authorized capital stock of Carolco consists of 650,000,000 shares of Carolco Common Stock and 10,000,000 shares of Carolco preferred stock (of the Carolco preferred stock, 120,000 shares have been designated as Carolco Series A Preferred Stock). As of the date of this Agreement: (a) approximately 137,687,728 shares of Carolco Common Stock are duly authorized, validly issued and outstanding, fully paid and non-assessable (excluding 2,327,381 treasury shares), (b) approximately 31,222,000 shares of Carolco Common Stock are reserved for issuance upon the exercise of outstanding options to purchase Carolco Common Stock, which options are listed in Exhibit 6.3A. (c) 82,500 shares of Carolco Series A Preferred Stock are duly authorized, validly issued and are outstanding, fully paid and non-assessable, (d) 37,500 shares of Carolco Series A Preferred Stock are reserved for issuance upon the distribution of payment-in-kind dividends; (e) approximately 137,500,000 shares of Carolco Common Stock are reserved for issuance upon conversion of the Carolco Series A Preferred Stock; (f) approximately 50,000,000 shares of Carolco Common Stock are reserved for issuance upon conversion of $30,000,000, in aggregate, of 5% Payment-in-Kind Convertible Subordinated Notes of Carolco (the "Carolco 5% Notes") due 2002; (g) approximately 66,666,666 shares of Carolco Common Stock are reserved for issuance upon conversion of $50,000,000, in aggregate, of 7% Convertible Subordinated Notes of Carolco (the "Carolco 7% Notes") due 2006; and (i) approximately 74,074,074 shares of Carolco Common Stock are reserved for issuance ("Pay-Per- View Shares") in connection with the Purchase Agreement dated as of August 19, 1993, by and between Carolco and TCI (the "TCI Purchase Agreement"). As of the date of this Agreement, except for this Agreement, the stock options referred to in clause (b) of this Section 6.3 and listed on Exhibit 6.3A, the shares of Carolco Common Stock underlying the Carolco Series A Preferred Stock, the Carolco 5% Notes and the Carolco 7% Notes and the Pay-Per-View Shares, and other agreements and transactions relating to capital stock described in the Carolco SEC Documents or in the CAROLCO LETTER, there are no options, warrants, rights, commitments, agreements, arrangements or undertakings of any kind to which Carolco or any of its Subsidiaries is a party or by which any of them is bound relating to the issuance of any capital stock or other voting securities of Carolco or of any of its Subsidiaries or any securities convertible into or exchangeable for any capital stock or other voting securities of Carolco or any of its Subsidiaries, or any options, warrants or other rights to purchase capital stock or other voting securities of Carolco or any of its Subsidiaries. As of the date of this Agreement, there were approximately 1,040 holders of record of Carolco Common Stock, and three (3) holders of record of Carolco Series A Preferred Stock. Exhibit 6.3B lists all agreements of Carolco by which Carolco may be required to register any of its securities ("Carolco Registration Rights Agreements"). Section 6.d Authority; Non-Contravention. (i) Carolco has all requisite corporate power and authority to enter into this Agreement and, subject to any approval by the stockholders of Carolco to consummate the Merger, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Carolco, the performance by Carolco of its obligations hereunder and the consummation by Carolco of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Carolco, except for the approval of Carolco's stockholders, which will be solicited in accordance with the provisions of Section 9.1 hereof, and no other act or proceeding on the part of Carolco is necessary to authorize the execution, delivery and consummation of this Agreement or the transactions contemplated hereby. (ii) The Board of Directors of Carolco has received the opinion of The Seidler Companies Incorporated ("Seidler"), Carolco's financial advisor, dated June 30, 1994, to the effect that in Seidler's opinion the financial terms of the Merger are fair, from a financial point of view, to the holders of Carolco Common Stock, other than the Carolco Investors (as defined below). A true, correct and complete copy of such opinion (the "Seidler Fairness Opinion") has been delivered to LIVE. For purposes of this Agreement, the "Carolco Investors" are Pioneer, Cinepole, RCS, MGM Holdings Corporation and New Carolco Investments B.V. (iii) Carolco has received an Investor Representation Agreement from each Carolco Investor and each such Investor Representation Agreement, substantially in the form of Exhibit 5.4(c) hereto, has been executed by such Carolco Investor. (iv) This Agreement has been duly and validly executed and delivered by Carolco and (assuming the valid authorization, execution and delivery of this Agreement by LIVE and CAC) constitutes a valid and binding obligation of Carolco enforceable against Carolco in accordance with its terms, except (i) as such obligation may be affected by bankruptcy, insolvency, reorganization, moratorium or similar laws, or by equitable principles relating to or limiting creditors' rights generally, and (ii) that the remedies of specific performance, injunction and other forms of equitable relief are subject to certain tests of equity jurisdiction, equitable defenses and the discretion of the court before which any proceeding therefor may be brought. (v) The Board of Directors of Carolco has approved the terms of this Agreement and of the transactions contemplated hereby. (vi) Except as set forth in the CAROLCO LETTER, the execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not breach, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or result in or give rise to a right of termination, cancellation or acceleration of any liability or obligation or to the loss of a material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Carolco or any of its Subsidiaries under, any provision of (i) the Restated Certificate of Incorporation of Carolco or Restated Bylaws of Carolco (true and complete copies of which as of the date hereof have been delivered to LIVE) or any provision of the comparable charter or organizational documents of any of its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Carolco or any of its Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, injunction, writ, or authorization, consent, approval, rule or regulation of any court or governmental authority applicable to Carolco or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses (ii) or (iii), any such conflicts, violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not (A) have a Material Adverse Effect on Carolco, (B) materially impair the ability of Carolco to perform its obligations hereunder or (C) prevent the consummation of any of the transactions contemplated hereby. (vii) No filing or registration with, or authorization, consent or approval of, any Governmental Entity is required by or with respect to Carolco or any of its Subsidiaries in connection with the execution and delivery of this Agreement by Carolco or is necessary for the consummation by Carolco of the Merger or the other transactions contemplated by this Agreement, except (i) in connection, or in compliance, with the provisions of the Securities Act and the Exchange Act, (ii) in connection with, or in compliance with, the provisions of the HSR Act, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which Carolco is qualified to do business, (iv) any required filings under state securities or "blue sky" laws, and (v) filings, registrations, authorizations, consents or approvals which if not made or obtained would have a Material Adverse Effect on Carolco or would prevent or materially adversely affect the transactions contemplated hereby. Section 6.e Carolco SEC Documents. Carolco has filed all required reports, statements, forms and documents with the SEC that Carolco was required to file during the three-year period immediately preceding the date hereof (the "Carolco SEC Documents"). As of their respective dates, and as subsequently revised, amended or superseded by later-filed Carolco SEC Documents through and including the date of this Agreement, the Carolco SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and as so revised, superseded or amended none of the Carolco SEC Documents including the financial information contained therein contained or currently contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Carolco included in Carolco SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of the unaudited statements, as permitted by Regulation S-X promulgated by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present the consolidated financial position of Carolco and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and statements of cash flows for the periods included therein (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). Notwithstanding the foregoing, Carolco makes no representation or warranty in this Agreement regarding any information (including financial information and financial statements) supplied by LIVE for inclusion in any Carolco SEC Documents. Section 6.f No Material Adverse Change. Except as set forth in the CAROLCO LETTER, since the date of the most recent balance sheet and notes to consolidated financial statements contained in Carolco's Annual Report on Form 10-K for the year ended December 31, 1993, or Carolco's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, as filed with the SEC ("Carolco Balance Sheet"), there has been no Material Adverse Change in Carolco and neither Carolco nor any of its Subsidiaries knows of any such Material Adverse Change that is threatened, nor has there been any damage, destruction or loss affecting the assets, properties, business, operations or condition (financial or otherwise) of Carolco or any of its Subsidiaries, whether or not covered by insurance which would have a Material Adverse Effect on Carolco, and which has not been subsequently reported in any of the Carolco SEC Documents filed with the SEC prior to the date hereof. Section 6.g Absence of Undisclosed Liabilities. Except as set forth in the Carolco SEC Documents or the CAROLCO LETTER, as of the date of the Carolco Balance Sheet neither Carolco nor any of its Subsidiaries had any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be set forth on a financial statement or in the notes thereto and which, individually or in the aggregate, would have a Material Adverse Effect on Carolco, which were not set forth on the Carolco Balance Sheet. Section 6.h Absence of Certain Events. Except as disclosed in Carolco SEC Documents or the CAROLCO LETTER, since the date of the Carolco Balance Sheet, Carolco and its Subsidiaries have conducted their business only in the ordinary course. Section 6.i No Solicitation. Carolco is not now engaged in any activities, discussions or negotiations with any parties (other than LIVE) in respect of a "takeover proposal" or an "offer" (both as defined in Section 8.3). Section 6.j Registration Statement and Proxy Statement. None of the information to be supplied by Carolco for inclusion or incorporation by reference in the Registration Statement or the Proxy Statement will (a) in the case of the Registration Statement, at the time it becomes effective, contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading, or (b) in the case of the Proxy Statement, at the time of the mailing of the Proxy Statement and at the times of the Stockholder Meetings, contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading. The Registration Statement will comply (with respect to Carolco) as to form in all material respects with the provisions of the Securities Act and the Proxy Statement will comply (with respect to Carolco) as to form in all material respects with the provisions of the Exchange Act. Notwithstanding the foregoing, Carolco makes no representation or warranty regarding any information (including financial information and financial statements) supplied by LIVE or CAC for inclusion in the Registration Statement or the Proxy Statement. Section 6.k Reorganization. Neither Carolco nor any of its Subsidiaries has taken any action nor failed to take any action which action or failure to take action would jeopardize the qualification of the Merger as a tax free reorganization under the Code. Section 6.l Litigation. Except as set forth in the CAROLCO LETTER or the Carolco SEC Documents, as of the date hereof, there is no claim, suit, action or proceeding pending or, to the knowledge of Carolco, threatened against or affecting Carolco or any of its Subsidiaries (whether or not covered by insurance) which (i) could reasonably be expected to have a Material Adverse Effect on Carolco (and Carolco is not aware of any reasonable basis for any such suit, action or proceeding), or (ii) challenge the transactions contemplated hereby at law or in equity or before or by any federal, state, local, foreign or other governmental department, commission, board, agency, instrumentality, or authority; nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Carolco or any of its Subsidiaries having, or which, insofar as reasonably can be foreseen, in the future would have, any such effect. Section 6.m Loan Agreements, Customers and Suppliers. (i) Neither Carolco nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease instrument, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on Carolco or except as are set forth in the CAROLCO LETTER. Set forth in the CAROLCO LETTER is a list of each loan or credit agreement, note, bond, mortgage, indenture and other agreement and instrument pursuant to which any indebtedness of Carolco or any of its Subsidiaries (other than indebtedness solely among or between Carolco and/or any of its Subsidiaries) in an aggregate principal amount in excess of $3,000,000 is outstanding or may be incurred and the respective principal amounts currently outstanding thereunder. (ii) Neither Carolco nor any of its Subsidiaries is in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such a violation of or default under) any material agreement with any of its customers or suppliers of products or services which are of material importance to Carolco or any of its Subsidiaries, and no such customer or supplier, to the knowledge of Carolco or any of its Subsidiaries, is in default under (nor does there exist any condition which upon the passage of time, the giving of notice or both would cause such customer or supplier to be in violation of or default under) any of such material agreements or except as are set forth in the CAROLCO LETTER. Section 6.n Permits. Carolco and each of its Subsidiaries possess all franchises, permits, licenses, certificates, approvals or other authorizations necessary to own or lease and operate their properties and to conduct their businesses, except for incidental franchises, permits, licenses, certificates, approvals and other authorizations that would be readily obtainable by any qualified applicant without undue burden in the event of any lapse, termination, cancellation or forfeiture or which if not obtained would not have a Material Adverse Effect on Carolco. Section 6.o Absence of Changes in Carolco Benefit Plans. Except as disclosed in the Carolco SEC Documents or the CAROLCO LETTER, since the date of the most recent audited financial statements included in the Carolco SEC Documents, there has not been any adoption or amendment by Carolco or any of its Subsidiaries of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical fringe benefit or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee or director of, or any other person providing services to, Carolco or any of its Subsidiaries (collectively, "Carolco Benefit Plans") which will have a Material Adverse Effect on Carolco. Carolco has delivered to LIVE true, correct and complete copies of all Carolco Benefit Plans. Each of the Carolco Benefit Plans is in material compliance with all applicable laws including ERISA and the Code. Section 6.p Intellectual Property. Carolco and its Subsidiaries own, or are licensed or otherwise have the right to use, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (collectively, the "Carolco Proprietary Rights") which are material to the conduct of the business of Carolco and its Subsidiaries taken as a whole. No claims are pending or, to the knowledge of Carolco, threatened that Carolco or any of its Subsidiaries is infringing or otherwise adversely affecting the rights of any person with regard to any Carolco Proprietary Right, except for such claims or threats which could not reasonably be expected to have a Material Adverse Effect on Carolco. To the knowledge of Carolco, no person is infringing the rights of Carolco with respect to any Carolco Proprietary Right that would have a Material Adverse Effect on Carolco. No lien, encumbrance or restriction with respect to any Carolco Proprietary Right has a Material Adverse Effect on Carolco, or so far as Carolco can now foresee could reasonably be expected to have a Material Adverse Effect on Carolco. Section 6.q Environmental Matters. To the knowledge of Carolco, Carolco and each of its Subsidiaries are in compliance with all applicable Environmental Laws, except for violations of the Environmental Laws that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on Carolco. Section 6.r Taxes. Except as set forth in the CAROLCO LETTER or the Carolco SEC Documents: (a) each of Carolco and its Subsidiaries has timely filed all federal, state, local or foreign tax returns required to be filed by it (except for all such returns the failure of which timely filing would, individually or in the aggregate, not have a Material Adverse Effect on Carolco), and has paid (or Carolco has paid on its behalf) all taxes shown as due on the returns in respect of the periods covered by such returns; (b) there are no tax liens upon any property or assets of Carolco or any of its Subsidiaries which would have a Material Adverse Effect on Carolco, except liens for current taxes not yet due; (c) neither Carolco nor any of its Subsidiaries is delinquent in the payment of any material tax, assessment or governmental charge which would have a Material Adverse Effect on Carolco; (d) no deficiencies for any taxes have been proposed, asserted or assessed against Carolco or any of its Subsidiaries which would have a Material Adverse Effect on Carolco or its Subsidiaries, and no requests for waivers of the time to assess any such taxes are pending; and (e) no audits of the tax returns of Carolco or any of its Subsidiaries are currently being conducted by a taxing authority, and neither Carolco nor its Subsidiaries have received any notices of pending or proposed audits from a taxing authority. Section 6.s Foreign Corrupt Practices Act. To the best knowledge of the officers of Carolco, neither Carolco, any Subsidiary of Carolco nor any director, officer, agent, employee or other person associated with or acting on behalf of any of them has (i) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment or made any unlawful expenditures relating to political activity, or made any direct or indirect unlawful payments to governmental officials or others or established or maintained any unlawful or unrecorded funds in violation of Section 30A of the Exchange Act or (ii) accepted or received any unlawful contributions, payments, gifts or expenditures. Carolco is in compliance in all material respects with the provisions of Section 13(b) of the Exchange Act and to the best knowledge of the officers of Carolco, there is no failure of compliance with such provisions. Section 6.t Brokers. No broker, investment banker or other person, other than Seidler or Daniels & Associates, the fees and expenses of which will be paid by Carolco in accordance with Carolco's written agreement with Seidler and Daniels & Associates (copies of which have been delivered by Carolco to LIVE prior to the date hereof), is entitled to any broker's, finder's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Carolco. Section 6.u Officers, Directors and Key Employees. The CAROLCO LETTER sets forth (i) the name and total compensation of each officer and director of Carolco; (ii) the name of each officer and director of any of Carolco's Subsidiaries; (iii) the name and total compensation of each other officer, director, employee, consultant, agent or other representative of Carolco or any of its Subsidiaries whose current annual rate of compensation (including bonuses and commissions) exceeds $150,000; (iv) all wage or salary increases or bonuses received by the persons identified in Section 6.21(i) and (iii) ("Significant Carolco Employees") since December 31, 1993, and any accrual for or commitment or agreement by Carolco or any of its Subsidiaries to pay such increases or bonuses; and (v) a notation with respect to each of such Significant Carolco Employees, whether they have an employment agreement with Carolco or any of its Subsidiaries and, if so, the date and term of such agreement. Except as set forth in the CAROLCO LETTER, (x) to the knowledge of Carolco or any of its Subsidiaries, none of such Significant Carolco Employees has made a threat to Carolco or any of its Subsidiaries or to any of their officers or directors to cancel or otherwise terminate such Significant Carolco Employee's relationship with Carolco or any of its Subsidiaries and (y) none of such Significant Carolco Employees have "change of control" clauses or agreements with Carolco or any of its Subsidiaries (or similar clauses or agreements permitting such Significant Carolco Employees to terminate their employment relationship with Carolco or any of its Subsidiaries) that would be triggered by the Merger which have not been waived on the date hereof. Section 6.v State Takeover Statutes. Neither Section 203 of the DGCL nor any other "fair price," "moratorium," "control share acquisition" or other state takeover statute or similar statute or regulation applies to the Merger by virtue of Carolco engaging in the transactions contemplated hereby. Section 6.w Insurance. Carolco and each of its Subsidiaries have been and are insured by financially sound and reputable insurers with respect to their properties and the conduct of their business in such amounts and against such risks as are reasonable in relation to their respective businesses, and each will use its best efforts to maintain such insurance. Such insurance is in full force and effect and no notice of cancellation or termination has been received with respect to any of said insurance. Except as disclosed in the CAROLCO LETTER, there are no claims pending thereunder except where such claim would not, individually or in the aggregate, have a Material Adverse Effect on Carolco. Section 6.x Title to Properties and Related Matters. Except with respect to the Carolco Proprietary Rights, Carolco and each of its Subsidiaries have good and marketable title (or valid and subsisting leasehold interests) to all of the personal properties and assets (tangible and intangible) and the real properties utilized in their businesses or reflected in the Carolco SEC Documents or acquired after the date thereof (other than properties sold or otherwise disposed of in the ordinary course of business) which are material to them, free and clear of all title defects, liens, encumbrances and restrictions, except (i) as reflected in the Carolco SEC Documents, (ii) to the extent not described in clause (i), those described in the CAROLCO LETTER, (iii) to the extent not described in clause (i), statutory liens not yet due or delinquent or the validity of which are being contested or litigated in good faith by appropriate proceedings and for which Carolco has set aside on its books reserves that are adequate with respect thereto; and (iv) liens, encumbrances, covenants, rights of way, building or use restrictions, easements, exceptions, variances, reservations and other matters or limitations of any kind, if any, which, when considered together with the liens described in clauses (i), (ii) and (iii), do not have a Material Adverse Effect on Carolco's business or operations. All properties of Carolco and each of its Subsidiaries are reflected in the Carolco SEC Documents in the manner and to the extent required by generally accepted accounting principles consistently applied. Neither the whole nor any portion of the leaseholds or any other assets of Carolco or any of its Subsidiaries is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor to the knowledge of Carolco or any of its Subsidiaries has any such condemnation, expropriation or taking been proposed, which would have a Material Adverse Effect on Carolco and its Subsidiaries taken as a whole. Section 6.y Accuracy of Carolco Disclosure. Neither this Agreement, nor any document or other paper furnished (or to be furnished pursuant hereto at the Closing) by or on behalf of Carolco to LIVE pursuant to this Agreement or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made, in the context in which made, not false or misleading. There is no fact that Carolco has not disclosed to LIVE in writing that has a Material Adverse Effect on Carolco or so far as Carolco can now foresee will have a Material Adverse Effect on Carolco or on the ability of Carolco to perform this Agreement. ARTICLE 7 REPRESENTATIONS AND WARRANTIES REGARDING CAC LIVE and CAC jointly and severally represent and warrant to Carolco as follows: Section 7.a Organization and Standing. CAC is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. CAC was organized solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business or entered into any agreements since it was incorporated which is not in connection with this Agreement, has not incurred any liabilities since it was incorporated, and (except as set forth in the LIVE LETTER) does not own any properties. Section 7.b Capital Structure. As of the date of this Agreement, the authorized capital stock of CAC consists of one share of CAC Common Stock, which is validly issued and outstanding, fully paid and nonassessable. As of the date of this Agreement, except for this Agreement, there are no options, warrants, rights, commitments, agreements, arrangements or undertakings of any kind to which CAC is a party or by which it is bound relating to the issuance of any capital stock or other voting securities of CAC or any securities convertible into or exchangeable for any capital stock or other voting securities of CAC, or any options, warrants or other rights to purchase capital stock or other voting securities of CAC. Section 7.c Authority. (i) CAC has all requisite corporate power and authority to enter into and execute this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance by CAC of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by its Board of Directors and LIVE as its sole stockholder, and no other corporate proceedings on the part of CAC are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by CAC and (assuming the due authorization, execution and delivery hereof by Carolco) constitutes a valid and binding obligation of CAC enforceable against CAC in accordance with its terms, except (i) as such obligation may be affected by bankruptcy, insolvency, reorganization, moratorium or similar laws, or by equitable principles relating to or limiting creditors' rights generally, and (ii) that the remedies of specific performance, injunction and other forms of equitable relief are subject to certain tests of equity jurisdiction, equitable defenses and the discretion of the court before which any proceeding therefor may be brought. (ii) The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby in compliance with the provisions hereof will not, breach, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under or result in or give rise to a right of termination, cancellation or acceleration of any liability or obligation or to the loss of a material benefit under, any provision of the Certificate of Incorporation or Bylaws of CAC, true and complete copies of which as of the date hereof have been delivered to Carolco. ARTICLE 8 COVENANTS RELATING TO CONDUCT OF BUSINESS Section 8.a Conduct of Business by LIVE Pending the Merger. (i) Ordinary Course. During the period from the date of this Agreement through the Effective Date or earlier termination of this Agreement, LIVE shall, and shall cause its Subsidiaries to, in all material respects carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable best efforts to preserve intact their current business organizations, keep available the services of their current officers and employees necessary to its business and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired at the Effective Date. Without limiting the generality of the foregoing, and, except as otherwise expressly contemplated by this Agreement, LIVE shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Carolco or except as disclosed in the LIVE LETTER: (1) (i) declare, set aside or pay any dividends on, or make any other actual, constructive or deemed distributions in respect of, any of its capital stock, except for dividends from Subsidiaries to LIVE, and except for dividends declared, set aside or paid with respect to the LIVE Series B Preferred Stock and LIVE Series C Preferred Stock in accordance with their current terms; (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (iii) purchase, redeem or otherwise acquire any shares of capital stock of LIVE or any other debt or equity securities thereof or any rights, warrants or options to acquire any such shares or other securities, except that LIVE may, before the Effective Date, redeem all outstanding shares of the LIVE Series B Preferred Stock as contemplated in Section 10.2(e) herein, and except that LIVE may, before the Effective Date, redeem or repay up to $6,000,000, in aggregate, of its $37,000,000, in aggregate, 12% Senior Subordinated Secured Notes due 1994 ("LIVE 12% Notes"); (D) amend the terms of any LIVE capital stock or any other securities of LIVE, except as contemplated herein. (2) issue, deliver, sell, pledge, dispose of or otherwise encumber (or propose to do any of the foregoing) any shares of its capital stock, any other voting securities or equity equivalent or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or equity equivalent (other than, in the case of LIVE, the issuance of LIVE Common Stock or LIVE Series A Common Stock during the period from the date of this Agreement through the Effective Date upon the exercise of existing LIVE stock options or warrants or conversion of LIVE Series B Preferred Stock or LIVE Series C Preferred Stock outstanding on the date of this Agreement in accordance with their current terms, and actions with respect to the LIVE Rights in accordance with their current terms); (3) other than as provided herein or contemplated hereby, amend the Restated Certificate of Incorporation of LIVE or Bylaws of LIVE or comparable charter or organizational documents of any of its Subsidiaries; (4) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, in each case that are material, individually or in the aggregate, to LIVE and its Subsidiaries taken as a whole or which would make it impossible or a violation of applicable laws, rules or regulations for Carolco to effect the Merger; (5) except with respect to plans previously disclosed to Carolco with respect to Strawberries and VCL, sell, lease, assign or otherwise dispose of or agree to sell, lease, assign or otherwise dispose of any of its assets that are material, individually or in the aggregate, to LIVE and its Subsidiaries taken as a whole or which would make it impossible or a violation of applicable laws, rules or regulations for Carolco to effect the Merger; (6) except as permitted in Section 10.2(f) hereof, incur any indebtedness (as defined in Section 5.13(a)). (7) make or incur any capital expenditure or expenditures exceeding $100,000 in the aggregate, other than in the ordinary course of business consistent with past practice; (8) except as disclosed in the LIVE SEC Documents, pay, discharge or satisfy any material claims, litigation, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities (a) reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of LIVE included in LIVE SEC Documents or (b) incurred in the ordinary course of business consistent with past practice; (9) take any action with respect to the grant of any severance or termination pay to any director, officer or employee of LIVE or any of its Subsidiaries or with respect to any increase of benefits payable under its severance or termination pay practices in effect on the date hereof, except for actions involving expenditures by LIVE or any of its Subsidiaries of (a) individually, no more than $100,000 in excess of the amount of compensation that would have been paid during the remainder of the term had the contract not been terminated, or (b) in the aggregate, no more than $500,000 in excess of the amount of compensation that would have been paid during the remainder of the term of all terminated contracts had they not been terminated; (10) except as may be required by law or this Agreement, enter into, adopt or increase in any material manner the benefits payable under any bonus, profit sharing, compensation, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements for the benefit or welfare of any director, officer or employee, or (except for increases in the ordinary course of business consistent with past practice) increase in any manner the compensation or fringe benefits of any director or officer or pay any benefit not required by any existing plan and arrangement (including the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (11) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it; (12) write down the value of any inventory or write off as uncollectible any notes or accounts receivable, except with respect to plans previously disclosed to Carolco with respect to Strawberries and VCL and except for immaterial write-downs and write-offs in the ordinary course of business and consistent with past practice; (13) dispose of or permit to lapse any LIVE Proprietary Rights or disclose to any person any LIVE Proprietary Rights except where such disposal, lapse or disclosure would not, individually or in the aggregate, have a Material Adverse Effect on LIVE; (14) pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of its officers or directors or any affiliate thereof, except pursuant to existing agreements with such persons, except for directors' fees and compensation to officers at rates not exceeding the rates of compensation paid during the six-month period ended December 31, 1993, or except for transactions in the ordinary course of business, or except as disclosed in the LIVE SEC Documents or except as otherwise permitted or contemplated hereunder; or (15) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing. (ii) No Default. Other than with Carolco's prior written consent or as disclosed in the LIVE LETTER, neither LIVE nor any of its Subsidiaries shall do any act or omit to do any act, or knowingly permit any act or omission to act, which will cause a breach of any material contract or commitment of LIVE or any of its Subsidiaries, except for such breaches (other than of the provisions of this Agreement) as would not, individually or in the aggregate, have a Material Adverse Effect on LIVE. (iii) Compliance with Laws. LIVE and each of its Subsidiaries shall duly comply with all laws applicable to it and its properties, operations, business and employees, except where the breach thereof would not, individually or in the aggregate, have a Material Adverse Effect on LIVE. (iv) Tax Returns. LIVE and each of its Subsidiaries shall prepare, file and pay amounts shown as due on all federal, state, local and foreign tax returns and amendments thereto required to be filed by it, except that the failure to file those state, local or foreign returns which individually or in the aggregate would not have a Material Adverse Effect on LIVE shall not be deemed a breach of this Section 8.1(d). (v) Other Actions. LIVE shall not, and shall not permit any of its Subsidiaries to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of LIVE or CAC set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions set forth in Article 10 not being satisfied. (vi) Advice of Changes; SEC Filings. LIVE shall promptly advise Carolco in writing of any change or event having, or which, insofar as can reasonably be foreseen, would have, a Material Adverse Effect on LIVE without regard to whether such change or event would be permitted hereunder. LIVE shall promptly advise Seidler in writing of any change or event or any other information which would materially impact the Seidler Fairness Opinion including material write-downs, litigation or changes in financial condition or capitalization without regard to whether such change or event would be permitted hereunder. LIVE shall promptly provide Carolco (or its counsel) with copies of all filings made by LIVE or CAC with the SEC or any other Governmental Entity in connection with this Agreement and the transactions contemplated hereby and thereby. Section 8.b Conduct of Business by Carolco Pending the Merger. (i) Ordinary Course. During the period from the date of this Agreement through the Effective Date or earlier termination of this Agreement, Carolco shall, and shall cause its Subsidiaries to, in all material respects carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable best efforts to preserve intact their current business organizations, keep available the services of their current officers and employees necessary to its business and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired at the Effective Date. Without limiting the generality of the foregoing, and, except as otherwise expressly contemplated by this Agreement, Carolco shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of LIVE or except as disclosed in the CAROLCO LETTER: (1) (A) declare, set aside or pay any dividends on, or make any other actual, constructive or deemed distributions in respect of, any of its capital stock, except for dividends from Subsidiaries to Carolco, and except for payment-in-kind dividends declared, set aside or paid on the Carolco Series A Preferred Stock, (B) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for shares of its capital stock, (C) purchase, redeem or otherwise acquire any shares of capital stock of Carolco or any of its Subsidiaries or any other debt or equity securities thereof or any rights, warrants or options to acquire any such shares or other securities, or (D) amend the terms of any Carolco capital stock or any other securities of Carolco. (2) issue, deliver, sell, pledge, dispose of or otherwise encumber (or propose to do any of the foregoing) any shares of its capital stock, any other voting securities or equity equivalent or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or equity equivalent (other than, in the case of Carolco, the issuance of Carolco Common Stock during the period from the date of this Agreement through the Effective Date upon the exercise of existing Carolco stock options or warrants, the conversion of Carolco Series A Preferred Stock, the Carolco 5% Notes or the Carolco 7% Notes in accordance with their current terms or the issuance of Pay-Per-View Shares during the period from the date of this Agreement through the Effective Date); (3) other than as provided herein, amend the Restated Certificate of Incorporation of Carolco or Restated Bylaws of Carolco or comparable charter or organizational documents of any of its Subsidiaries; (4) enter into any contract, agreement, commitment or arrangement with respect to United States and Canadian video rights; (5) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, in each case that are material, individually or in the aggregate, to Carolco and its Subsidiaries taken as a whole or which would make it impossible or a violation of applicable laws, rules or regulations for LIVE to effect the Merger; (6) sell, lease, assign or otherwise dispose of or agree to sell, lease, assign or otherwise dispose of any of its assets that are material, individually or in the aggregate, to Carolco and its Subsidiaries taken as a whole or which would make it impossible or a violation of applicable laws, rules or regulations for LIVE to effect the Merger; (7) incur any indebtedness (as defined in Section 5.13(a)), except for indebtedness incurred in the ordinary course of business consistent with past practice; or make any material loans, advances or capital contributions to, or investments in, any other person, other than to any wholly-owned Subsidiary of Carolco; and other than loans, advances, capital contributions, and investments made in the ordinary course of business, consistent with past practice; (8) make or incur any capital expenditure or expenditures exceeding $100,000 in the aggregate other than in the ordinary course of business consistent with past practice; (9) except as disclosed in the Carolco SEC Documents, pay, discharge or satisfy any material claims, litigation, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities (a) reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of Carolco included in Carolco SEC Documents or (b) incurred in the ordinary course of business consistent with past practice; (10) take any action with respect to the grant of any severance or termination pay to any director, officer or employee of Carolco or any of its Subsidiaries or with respect to any increase of benefits payable under its severance or termination pay practices in effect on the date hereof, except for actions involving expenditures by Carolco or any of its Subsidiaries of (a) individually, no more than $100,000 in excess of the amount of compensation that would have been paid during the remainder of the term had the contract not been terminated, or (b) in the aggregate, no more than $500,000 in excess of the amount of compensation that would have been paid during the remainder of the term of all terminated contracts had they not been terminated; (11) except as may be required by law or this Agreement, enter into, adopt or increase in any material manner the benefits payable under any bonus, profit sharing, compensation, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements for the benefit or welfare of any director, officer or employee, or (except for increases in the ordinary course of business consistent with past practice) increase in any manner the compensation or fringe benefits of any director or officer or pay any benefit not required by any existing plan and arrangement (including the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (12) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it; (13) write down the value of any inventory or write off as uncollectible any notes or accounts receivable, except for immaterial write-downs, and write-offs in the ordinary course of business and consistent with past practice; (14) dispose of or permit to lapse any Carolco Proprietary Rights or disclose to any person any Carolco Proprietary Rights except where such disposal, lapse or disclosure would not, individually or in the aggregate, have a Material Adverse Effect on Carolco; (15) pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of its officers or directors or any affiliate thereof, except pursuant to existing agreements with such persons, except for directors' fees and compensation to officers at rates not exceeding the rates of compensation paid during the six-month period ended December 31, 1993, or except for transactions in the ordinary course of business or except as otherwise permitted or contemplated hereunder; or (16) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing. (ii) No Default. Other than with LIVE's prior written consent or as disclosed in the CAROLCO LETTER, neither Carolco nor any of its Subsidiaries shall do any act or omit to do any act, or knowingly permit any act or omission to act, which will cause a breach of any material contract or commitment of Carolco or any of its Subsidiaries, except for such breaches (other than of the provisions of this Agreement) as would not, individually or in the aggregate, have a Material Adverse Effect on Carolco. (iii) Compliance with Laws. Carolco and each of its Subsidiaries shall duly comply with all laws applicable to it and its properties, operations, business and employees, except where the breach thereof would not, individually or in the aggregate, have a Material Adverse Effect on Carolco. (iv) Tax Returns. Carolco and each of its Subsidiaries shall prepare, file and pay amounts shown as due on all federal, state, local and foreign tax returns and amendments thereto required to be filed by it, except that the failure to file those state, local or foreign returns which individually or in the aggregate would not have a Material Adverse Effect on Carolco shall not be deemed a breach of this Section 8.2(d). (v) Other Actions. Carolco shall not, and shall not permit any of its Subsidiaries to, take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of Carolco set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect, or (iii) any of the conditions set forth in Article 10 not being satisfied. (vi) Advice of Changes; SEC Filings. Carolco shall promptly advise LIVE in writing of any change or event having, or which, insofar as can reasonably be foreseen, would have, a Material Adverse Effect on Carolco without regard to whether such change or event would be permitted hereunder. Carolco shall promptly advise Chemical in writing of any change or event or any other information which would materially impact the Chemical Fairness Opinion, including material write-downs, litigation or changes in financial condition or capitalization without regard to whether such change or event would be permitted hereunder. Carolco shall promptly provide LIVE (or its counsel) with copies of all filings made by Carolco with the SEC or any other Governmental Entity in connection with this Agreement and the transactions contemplated hereby. Section 8.c Competing Offers. Either LIVE or Carolco may accept a competing "takeover proposal" or "offer" if the Board of Directors of LIVE or Carolco, as the case may be, declare such "takeover proposal" or "offer" advisable, in the best interest of LIVE or Carolco, as the case may be, and that the terms, in the aggregate, of such "takeover proposal" or "offer" are better than the terms of the Merger as provided herein, provided, however, that LIVE or Carolco, as the case may be, shall pay the costs and expenses incurred in connection with the Merger in accordance with Section 9.7 hereof. In the case of Carolco, "takeover proposal" or "offer" shall mean any proposal or offer, other than a proposal or offer by LIVE or any of its affiliates, for a tender or exchange offer, a merger, consolidation or other business combination involving Carolco or any Subsidiary of Carolco or any proposal to acquire in any manner all or a substantial equity interest in, or all or a substantial portion of the assets of, Carolco or any of its Subsidiaries other than the transactions contemplated by this Agreement. In the case of LIVE, "takeover proposal" or "offer" shall mean any proposal or offer, other than a proposal or offer by Carolco or any of its affiliates, for a tender or exchange offer, a merger, consolidation or other business combination involving LIVE or any Subsidiary of LIVE (other than Strawberries or VCL) or any proposal to acquire in any manner all or a substantial equity interest in, or all or a substantial portion of the assets of, LIVE or any of its Subsidiaries (other than Strawberries or VCL) other than the transactions contemplated by this Agreement. Nothing herein shall prevent LIVE from selling all or any part of its Strawberries or VCL subsidiaries on terms previously disclosed to Carolco or otherwise acceptable to Carolco. Section 8.d Reorganization. During the period from the date of this Agreement through the Effective Date, unless the other parties hereto shall otherwise agree in writing, none of LIVE, CAC, any other Subsidiary of LIVE, Carolco nor any Subsidiary of Carolco shall knowingly take or fail to take any action which action or failure to act would jeopardize qualification of the Merger as a tax free reorganization under the Code. Section 8.e Conduct of Business of CAC Pending the Merger. During the period from the date of this Agreement through the Effective Date, CAC shall not engage in any activities of any nature except as provided in or contemplated by this Agreement. Section 8.f Update of LIVE LETTER and CAROLCO LETTER. LIVE will update the LIVE LETTER and Carolco will update the CAROLCO LETTER (the CAROLCO LETTER and the LIVE LETTER are sometimes referred to herein collectively as the "Letters" and individually as a "Letter") from time to time hereafter until the Closing, including as of the date of the mailing of the Proxy Statement and as of the date of the Closing, to the extent any information disclosed on such Letters requires updating because of a change in facts or circumstances, and to the extent any new information that would have been included in either of such Letters on the date hereof had such information existed or been known on the date hereof later comes to the knowledge of LIVE or Carolco, as the case may be. The update of such Letters shall not modify or add additional exceptions to representations, warranties or covenants contained herein; any updating of the LIVE LETTER or CAROLCO LETTER which subsequently makes materially inaccurate as of the date of this Agreement any representation or warranty that is qualified as to materiality, or makes inaccurate as of the date of this Agreement any representation or warranty that is not qualified as to materiality, shall be deemed a material breach of this Agreement by the party whose representation or warranty was so made inaccurate; and neither party shall, by any update of its respective Letter, be relieved from the conditions set forth in Sections 10.2(a) and 10.2(b) and 10.3(a) and 10.3(b) concerning the truth and correctness of such parties' respective representations and warranties contained herein on and as of the Effective Date. Section 8.g Bringdown of Fairness Opinion. LIVE will request that Chemical confirm the Chemical Fairness Opinion and Carolco will request that Seidler confirm the Seidler Fairness Opinion each as of the day immediately preceding the Effective Date without any material change in any conclusions or opinions contained therein. ARTICLE 9 ADDITIONAL AGREEMENTS Section 9.a Carolco and LIVE Stockholder Approvals. (i) Carolco shall promptly call a meeting of its stockholders (the "Carolco Stockholder Meeting") for the purpose of voting upon this Agreement and the transactions contemplated hereby and, subject to the fiduciary duties of Carolco's Board of Directors under applicable law, shall use its best efforts to obtain stockholder approval of this Agreement and the transactions contemplated hereby. The Carolco Stockholder Meeting shall be held as soon as practicable following the date upon which the Registration Statement becomes effective and Carolco will, through its Board of Directors but subject to the fiduciary duties of its Board of Directors under applicable law as advised in writing by outside counsel, recommend to its stockholders the approval of this Agreement and the transactions contemplated hereby and not rescind its declaration that the Merger is advisable. This Agreement and the transactions contemplated hereby shall be approved on behalf of Carolco's stockholders if (i) holders of at least a majority of the combined voting power with respect to Carolco's voting securities entitled to vote and present at the Carolco Stockholder Meeting (other than the Carolco Investors) vote in favor of this Agreement and the transaction contemplated hereby, (ii) holders of at least a majority of the combined voting power with respect to Carolco's voting securities entitled to vote at the Carolco Stockholder Meeting (including the Carolco Investors) vote in favor of this Agreement and the transactions contemplated hereby, and (iii) holders of 100% of the Carolco Series A Preferred Stock, voting as a class, vote in favor of this Agreement and the transactions contemplated hereby. (ii) LIVE shall promptly call a meeting of its stockholders (the "LIVE Stockholder Meeting" and, together with Carolco Stockholder Meeting, the "Stockholder Meetings") for the purpose of voting upon this Agreement and the transactions contemplated hereby, including the amendments to the Restated Certificate of Incorporation of LIVE referred to in Article 3 above, the issuance of LIVE Common Stock and LIVE Series D Preferred Stock in connection with the Merger, and taking such other actions as are reasonably required to consummate the Merger and, subject to the fiduciary duties of LIVE's Board of Directors under applicable law, shall use its best efforts to obtain stockholder approval of such issuance and action. The LIVE Stockholder Meeting shall be on the date of the Carolco Stockholder Meeting or, if such date is not practicable, on the closest date practicable. LIVE will, through its Board of Directors but subject to the fiduciary duties of its Board of Directors under applicable law as advised in writing by outside counsel, recommend to its stockholders the approval of this Agreement and the transactions contemplated hereby and not rescind its declaration that the Merger is advisable. This Agreement and the transactions contemplated hereby shall be approved on behalf of LIVE's stockholders if (i) holders of at least a majority of the combined voting power with respect to LIVE's voting securities entitled to vote and present at the LIVE Stockholder Meeting (other than the LIVE Investors) vote in favor of this Agreement and the transactions contemplated hereby, (ii) holders of at least 66-2/3% of the combined voting power with respect to LIVE's voting securities entitled to vote at the LIVE Stockholder Meeting (including the LIVE Investors) vote in favor of the Agreement and the transactions contemplated hereby and (iii) holders of 100% of the LIVE Series C Preferred Stock, voting as a class, vote in favor of the Agreement and the transactions contemplated hereby. Section 9.b Registration Statement and Proxy Statement (i) LIVE and Carolco shall jointly prepare and file with the SEC as soon as practicable the Registration Statement and the Proxy Statement. The Registration Statement will provide for the registration of all shares of LIVE capital stock to be issued pursuant to the Merger, including without limitation, any shares of LIVE Common Stock underlying any LIVE Series D Preferred Stock to be issued pursuant to the Merger, any shares of LIVE Common Stock underlying any convertible debt of Carolco disclosed in the CAROLCO LETTER or herein, any shares of LIVE Common Stock underlying any warrants previously issued by Carolco as described herein or in the CAROLCO LETTER, and, as LIVE and Carolco mutually agree, any other security of LIVE. Each of LIVE and Carolco shall use all reasonable efforts to (i) have the Registration Statement declared effective by the SEC as soon as practicable and (ii) respond to and/or comply with any SEC staff comments on the Proxy Statement. LIVE shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under state blue sky or securities laws in connection with the issuance of the LIVE Common Stock and LIVE Series D Preferred Stock pursuant to the Merger and the exercise after the Effective Date of the New Stock Options issuable in respect of Carolco Stock Options as contemplated by Section 9.8. LIVE shall also prepare and timely file with the SEC one or more registration statements on Form S-8 for the purpose of registering the shares of LIVE Common Stock issuable after the Effective Date upon exercise of any Carolco Stock Options theretofore granted (collectively, the "Option Registration Statement"), and LIVE shall use its best efforts to cause the Option Registration Statement to become effective as soon as practicable after the Effective Date. LIVE and Carolco shall each furnish the other company all information concerning their respective companies and all such other information required for use in the Registration Statement, the Option Registration Statement and the Proxy Statement and both LIVE and Carolco shall each take such other action as the other company may reasonably request (and in the case of the Proxy Statement as required by the Exchange Act) in connection with the preparation of such Registration Statement, Option Registration Statement and Proxy Statement and the actions to be taken by LIVE pursuant to this Section 9.2. (ii) If at any time prior to the Effective Date any event with respect to LIVE or Carolco, their officers and directors or any of their Subsidiaries (including CAC) shall occur which is required at that time to be described in the Proxy Statement or the Registration Statement, the party with respect to whom the event occurs shall promptly notify the other party, and to the extent required by law, Carolco and LIVE will promptly file an amendment or supplement with the SEC and disseminate such amendment to the stockholders of LIVE and the stockholders of Carolco. Section 9.c Amendment to Indentures. (i) LIVE Note Indenture. LIVE shall take all action necessary to amend the Indenture ("LIVE Increasing Rate Notes Indenture") governing its $40,000,000, in aggregate, Increasing Rate Secured Senior Subordinated Notes due 1999 ("LIVE Increasing Rate Notes"), in form, scope and substance and on terms set forth in Exhibit 9.3(a). (ii) LIVE 12% Indenture. LIVE shall take all action necessary to amend the Indenture ("LIVE 12% Indenture") governing its $37,000,000, in aggregate, 12% Notes due 1994, in form, scope and substance and on terms set forth in Exhibit 9.3(b) and in accordance with the actions contemplated by Section 8.1(a)(i)(C) hereof with respect to the LIVE 12% Notes. Section 9.d Listing Application. LIVE will use its best efforts to obtain, prior to the Effective Date, approval for listing the Shares of LIVE Common Stock registered pursuant to the Registration Statement on the New York Stock Exchange, upon official notice of issuance. Section 9.e Access to Information. Each of the parties hereto shall, and shall cause each of their respective Subsidiaries to, afford to the other party and to such other party's accountants, counsel, financial advisers and other representatives, reasonable access, and permit them to make such inspections as they may reasonably require, during normal business hours during the period from the date of this Agreement through the Effective Date to all their respective properties, books, contracts, commitments and records and, during such periods, Carolco and LIVE, as the case may be, shall, and shall cause each of their respective Subsidiaries to, furnish promptly to LIVE or Carolco, as the case may be, all other information concerning its business, properties and personnel as LIVE or Carolco, as the case may be, may reasonably request. Except as required by law, each of LIVE and Carolco will hold, and will cause its affiliates, associates, agents and representatives to hold, any nonpublic information in confidence unless disclosure of such material is compelled by judicial or administrative process, or, in the reasonable opinion of LIVE's and Carolco's respective outside counsel, by other requirements of law (in which cases the party compelled to disclose shall give reasonable notice to the other party prior to making the compelled disclosure), until such time as such information becomes publicly available otherwise than through the actions of such person, and each of Carolco and LIVE shall use its best efforts to ensure that such affiliates, associates and representatives do not disclose such information to others without the prior written consent of Carolco or LIVE, as appropriate. In the event of termination of this Agreement for any reason, LIVE shall promptly return all documents containing nonpublic information so obtained from Carolco or any of its Subsidiaries and any copies made of such documents for LIVE, and Carolco shall promptly return all documents containing nonpublic information so obtained from LIVE or any of its Subsidiaries and any copies made of such documents for Carolco. No investigation pursuant to this Section 9.5 shall add to or subtract from any representations or warranties of Carolco or LIVE, as the case may be, or the conditions to the respective obligations of Carolco or LIVE or CAC to consummate the Merger. Nothing herein shall limit or release any of the confidentiality agreements previously entered in by the parties. Section 9.f Affiliates. Prior to the Effective Date, Carolco and LIVE, after consultation with Gipson Hoffman & Pancione and Sidley & Austin, shall each cause to be prepared and delivered to the other a list (reasonably satisfactory to each other's counsel) identifying all persons who, at the time of the respective Stockholder Meetings, may be deemed to be "affiliates" of Carolco as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Affiliates"). Carolco and LIVE, through its counsel, shall advise each such possible Affiliate of its obligations under Rule 145 with respect to shares of LIVE Common Stock issued to each such possible Affiliate pursuant to the Merger. Section 9.g Fees and Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, except that the legal fees and expenses incurred in connection with printing and mailing the Registration Statement and related materials, the Option Registration Statement and the Proxy Statement will be shared equally by LIVE and Carolco, except that in the event this Agreement shall terminate by virtue of either of the provisions of subsections (b)(i) or (ii) or (c)(i) or (ii) of Section 11.1 hereof, then Carolco, in the case of subsection (b), and LIVE, in the case of subsection (c), shall reimburse the other party for all such legal fees and expenses. In the event this Agreement shall terminate by virtue of Subsection (d) of Section 11.1 hereof, then the party who accepts the "competing proposal" or "offer" shall reimburse the other party for all out- of-pocket expenses incurred by the other party in connection with the Merger through the date of termination of this Agreement. Section 9.h Carolco Stock Options. (i) As of the Effective Date, LIVE shall assume (pursuant to an assumption agreement satisfactory to LIVE and Carolco) Carolco's obligations under the 1986 Non-Employee Stock Option Plan of Carolco and the 1986 Employee Stock Option Plan of Carolco (collectively, the "1986 Plan") and the 1989 Stock Option and Stock Appreciation Rights Plan of Carolco (the "1989 Plan") (the 1986 Plan and the 1989 Plan are sometimes referred to hereinafter collectively as the "Carolco Stock Plans"). Each option to purchase shares of Carolco Common Stock outstanding immediately prior to the Effective Date pursuant to the Carolco Stock Plans (a "Plan Option") shall become and represent an option to purchase that number of shares of LIVE Common Stock (a "New Stock Option") as the holder of such Plan Option would have been entitled to receive by virtue of the Merger had it exercised such Plan Option immediately prior to the Effective Date, at an exercise price per share equal to the exercise price per share of such Plan Option immediately prior to the Effective Date multiplied by the Exchange Ratio. After the Effective Date, except as provided in this Section 9.8, each New Stock Option shall be exercisable upon the same terms and conditions as were applicable under the related Plan Option prior to the Effective Date. (ii) All time elapsed since the grant of a Plan Option shall be credited to the applicable successor option for purposes of determining when such successor option vests. (iii) In the event of any reclassification, stock split or stock dividend with respect to LIVE Common Stock (or if a record date with respect to any of the foregoing) should occur after the date of this Agreement and before the Effective Date, appropriate and proportionate adjustments shall be made in the exchange ratios for Plan Options. (iv) After the Effective Date, LIVE shall grant no New Stock Options or Carolco stock appreciation rights under the Carolco Stock Plans as assumed by LIVE or any LIVE stock options or LIVE stock appreciation rights under LIVE's 1988 Stock Option and Stock Appreciation Rights Plan. After the Effective Date, LIVE may grant LIVE stock options or LIVE stock appreciation rights only pursuant to a 1994 Stock Option and Stock Appreciation Rights Plan for LIVE substantially in the form attached hereto as Exhibit 9.8(d) ("New Plan"), subject to approval of such New Plan by a majority of the voting power of LIVE entitled to vote and voting at the LIVE Stockholder Meeting. Section 9.i Other Obligations of Carolco and LIVE. (i) As of the Effective Date, LIVE shall assume (pursuant to an assumption agreement in the form of Exhibit 9.9(a) hereto) each of Carolco's obligations under that certain Employment Agreement dated as of August 10, 1994, by and between Carolco and Mario Kassar. The agreement of LIVE under this Section 9.9(a) is also made for the benefit of Mario Kassar, who is intended to be, and hereby expressly is constituted, a third party beneficiary of such agreement. (ii) As of the Effective Date, LIVE shall become co- obligor with Carolco (pursuant to an amendment to the Indenture dated as of October 20, 1993, by and between Carolco and First Trust of California, National Association, as Indenture Trustee, governing the Carolco 5% Notes in the form of Exhibit 9.9(b) hereto ("Amended and Restated Carolco 5% Indenture")), with respect to certain of Carolco's obligations with respect to the Carolco 5% Notes. (iii) As of the Effective Date, LIVE shall become co-obligor with Carolco (pursuant to an amendment to the Standby Purchase and Investment Agreement dated as of July 29, 1993, by and among Carolco, Cinepole, Le Studio Canal+, RCS, Pioneer and Tele-Communications, Inc. in the form of Exhibit 9.9(c) hereto ("Amended and Restated Standby Purchase and Investment Agreement")) with respect to certain of Carolco's obligations with respect to the Carolco 7% Notes. (iv) As of the Effective Date, LIVE, Carolco and American Stock Transfer & Trust Company shall have entered into that certain First Supplemental Indenture in the form of Exhibit 9.9(d) hereto with respect to the Indenture governing the 11.5%/10% Reducing Rate Senior Notes of Carolco (the "Carolco 11.5%/10% Notes"). (v) As of the Effective Date, LIVE, Carolco and American Stock Transfer & Trust Company shall have entered into that certain First Supplemental Indenture in the form of Exhibit 9.9(e) hereto with respect to the Indenture governing the 13%/12% Reducing Rate Senior Subordinated Notes of Carolco (the "Carolco 13%/12% Notes"). (vi) As of the Effective Date, LIVE, Carolco and IBJ Schroder Bank & Trust Company shall have entered into that certain First Supplemental Indenture in the form of Exhibit 9.9(f) hereto with respect to the Amended and Restated Indenture governing the 13% Senior Subordinated Notes of Carolco (the "Carolco 13% Notes"). (vii) As of the Effective Date, LIVE shall become a party (pursuant to an assumption agreement in the form of Exhibit 9.9(g) hereto to that certain Domestic Output Agreement dated as of May 1, 1993 by and between Carolco and Metro-Goldwyn-Mayer Inc. ("MGM") and with respect to that certain Confidential Draft Term Sheet dated as of April 23, 1993 by and between Carolco and MGM (together, the "MGM Distribution Agreements"). (viii) As of the Effective Date, LIVE (as Carolco Entertainment Inc.) shall become a party (pursuant to an assumption agreement in the form of Exhibit 9.9(h) hereto) to that certain Output Agreement dated as of May 8, 1991, by and between RCS Video Services Antilles N.V. and Carolco International Inc. (formerly known as Carolco International N.V.), as amended and to that certain Inducement Letter dated as of May 8, 1991, by and among RCS Video Services Antilles N.V., Carolco, Carolco International Inc. (formerly known as Carolco International N.V.), RCS Editori SpA and RCS International Communications N.V. (ix) As of the Effective Date, LIVE (as Carolco Entertainment Inc.) shall become a party (pursuant to an assumption agreement in the form of Exhibit 9.9(i) hereto) to that certain First Refusal Agreement dated effective as of October 30, 1991, by and between Carolco and Le Studio Canal+ S.A. and agreed to by Carolco International Inc. (formerly known as Carolco International N.V.). (x) As of the Effective Date, LIVE (as Carolco Entertainment Inc.) shall become a party (pursuant to an assumption agreement in the form of Exhibit 9.9(j) hereto) to that certain Ancillary Agreement Concerning Japan and Laser Disc Rights of Pioneer, dated as of July 3, 1990 by and between Carolco and Pioneer and agreed to by Carolco International Inc. (formerly known as Carolco International N.V.) and LIVE. Section 9.j Registration Rights. After the Effective Date, all registration rights in favor of the LIVE Investors with respect to any equity securities of LIVE (other than the LIVE Series C Preferred Stock and the LIVE Common Stock underlying such LIVE Series C Preferred Stock, as to which the registration rights agreement currently in effect with respect thereto shall continue to remain in full force and effect after the Effective Date) held by them as of the Effective Date, or in favor of the Carolco Investors (other than New Carolco Investments B.V.) with respect to any equity securities of Carolco held by them as of the Effective Date, shall be cancelled and replaced by a registration rights agreement (the "New Carolco Entertainment Inc. Registration Rights Agreement") substantially in the form of Exhibit 9.10 hereto. Section 9.k Best Efforts. Upon the terms and subject to the conditions set forth in this Agreement, and further subject to the fiduciary obligations of the respective Boards of Directors of LIVE, CAC and Carolco under applicable law as advised in writing by outside counsel, each of the parties agrees to use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger, and the other transactions contemplated by this Agreement, including (a) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (b) the obtaining of all necessary consents, approvals or waivers from third parties including those entities identified in the LIVE LETTER and the CAROLCO LETTER, (c) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement, or the consummation of the transactions contemplated hereby and thereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (d) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by this Agreement. Copies of all third-party consents obtained hereunder by LIVE (or any of its Subsidiaries) or Carolco (or any of its Subsidiaries) shall be provided to LIVE or Carolco, respectively, promptly after any such consent is obtained. In case at any time after the Effective Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of LIVE, Carolco or CAC shall take all such necessary action. Section 9.l Public Announcements. LIVE and CAC, on the one hand, and Carolco, on the other hand, will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law. Nothing herein shall limit or release any of the confidentiality agreements previously entered into by the parties. Section 9.m State Takeover Laws. If any "fair price" or "control share acquisition" statute or other similar statute or regulation is or shall become applicable to the transactions contemplated hereby, Carolco and the members of the Board of Directors of Carolco and LIVE and the members of the Board of Directors of LIVE shall use their best efforts to grant such approvals and take such actions as are necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to minimize the effects of such statute or regulation on the transactions contemplated hereby. Section 9.n Indemnification. LIVE and CAC agree that all rights to indemnification from Carolco for acts or omissions occurring prior to the Effective Date now existing shall continue in full force and effect, as obligations of the Surviving Corporation, in accordance with their terms. LIVE will provide, or cause the Surviving Corporation to provide, for a period of not less than seven years from the Effective Date, Carolco's current directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Date (the "D&O Insurance") that is no less favorable to them than Carolco's existing policy or, if substantially equivalent insurance coverage is unavailable or is only available on terms which LIVE believes are not commercially reasonable, the best available coverage. At and after the Effective Date, LIVE shall indemnify, defend and hold harmless each person who is now or has been at any time prior to the date hereof or who becomes prior to the Effective Date an officer, director, employee, agent or representative of Carolco or any of its Subsidiaries and all defendants in their capacity as such in the same manner and to the same extent required by the Restated Certificate of Incorporation of Carolco and the Restated Bylaws of Carolco and/or the comparable charter or organizational documents of any of its Subsidiaries as of the date hereof and in the same manner and to the same extent required by any Indemnity Agreements existing as of the date hereof between Carolco or any of its Subsidiaries whereby Carolco or any of its Subsidiaries has agreed to indemnify, defend or hold harmless any officers, directors, employees or agents thereof (a list of such indemnity agreements is included in the CAROLCO LETTER). Section 9.o [Intentionally Deleted.] Section 9.p [Intentionally Deleted.] Section 9.q LIVE Rights. In satisfaction of Section 10.2(i) hereof, before the Effective Date LIVE will take all actions necessary to terminate the existing LIVE Rights Agreement and cancel all outstanding LIVE Rights. Section 9.r Continuation of Business or Business Assets. After the Effective Date, LIVE will continue at least one significant historic business line of Carolco or use at least a significant portion of Carolco's historic business assets in a business, in each case within the meaning of Treasury Regulation Sec. 1.368-1(d). ARTICLE 10 CONDITIONS PRECEDENT Section 10.a Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Effective Date of the following conditions: (i) Stockholder Approvals. (i) This Agreement and the transactions contemplated hereby shall have been approved by the requisite vote of the holders of Carolco capital stock as set forth in Section 9.1 above and (ii) this Agreement and the transactions contemplated hereby, including the issuance of LIVE Common Stock and LIVE Series D Preferred Stock pursuant to the Merger, the amendments to the Restated Certificate of Incorporation of LIVE and related matters shall have been approved by the requisite vote of the holders of LIVE capital stock as set forth in Section 9.1 above. (ii) Bringdown of Fairness Opinions. The Chemical Fairness Opinion and the Seidler Fairness Opinion shall have been confirmed as of the date immediately preceding the Effective Date without any material change in any conclusions or opinions contained therein. (iii) Registration Statements. The Registration Statement shall have become effective in accordance with the provisions of the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and remain in effect and no proceedings for such purpose shall be pending before the SEC. (iv) Stock Exchange Listing. The shares of LIVE Common Stock registered pursuant to the Registration Statement shall be approved for listing on the New York Stock Exchange, upon official notice of issuance, or on such other principal United States trading market (whether a stock exchange or the National Association of Securities Dealers Automated Quotation System) as the LIVE Common Stock is listed immediately prior to the Effective Date or as the parties may mutually agree. (v) Reorganization. Each of Carolco and LIVE shall be reasonably satisfied that none of Carolco, LIVE and CAC will recognize material taxable gain as a result of the Merger and that its stockholders will not recognize any taxable gain as a result of the Merger. (vi) Adequate Financing Commitments. Aggregate financing commitments shall have been received by Carolco and LIVE, the terms of which shall be set out more fully on Exhibit 10.1(f) hereto. (vii) No Material Adverse Change. There shall not have occurred any change or development in or affecting the assets, liabilities, business, operations, condition (financial or other) or prospects of Carolco or LIVE which, in the aggregate, could be reasonably expected to have a Material Adverse Effect on such party, except for (i) such changes at LIVE with respect to plans previously disclosed to Carolco with respect to Strawberries and VCL, or (ii) such changes resulting from facts disclosed as of the date of the Merger Agreement in the CAROLCO LETTER or Carolco SEC Documents or the LIVE LETTER or LIVE SEC Documents, as the case may be. (viii) Governmental Approvals. All consents and approvals of, and notices to and filings with, any governmental authority or agency as are required in connection with the consummation of the Merger and the transactions contemplated hereby shall have been obtained, given and made, and all waiting periods, if any, applicable to the consummation of the Merger imposed by any applicable law, rule or regulation (including, but not limited to, the HSR Act) shall have expired without any action, proceeding or investigation being commenced or threatened which seeks to enjoin or delay consummation of the Merger or to impose any material restrictions or onerous requirements on Carolco, LIVE or their respective stockholders. (ix) Third Party Consents. All consents and approvals of, and notices to and filings with, any non-governmental persons required in connection with the consummation of the Merger and the transactions contemplated hereby shall have been obtained, given or made, except for any thereof which, if not obtained, given or made would not, in the aggregate, have a Material Adverse Effect on the ability of any party to consummate the transactions contemplated hereby or on the assets, liabilities, business, operations, condition (financial or other) or prospects of any party or any of its direct or indirect subsidiaries. (x) No Order. No Governmental Entity or court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of preventing the consummation of the Merger or making the transactions contemplated hereby illegal (each party hereto agreeing to use its best efforts to have any such order, injunction or the like lifted or waived). (xi) Approval of Counsel to Carolco and LIVE. All actions, proceedings, instruments and documents required to carry out the transactions contemplated hereby or incidental hereto and all other related legal matters shall be reasonably satisfactory to and approved by counsel for each of Carolco and LIVE and such counsel shall have been furnished with such certified copies of such corporate actions and proceedings and such other instruments and documents as it shall have reasonably requested. (xii) Registration Rights. The Carolco Investors (other than New Carolco Investments B.V.) and the LIVE Investors shall have entered into the registration rights agreement contemplated in Section 9.10 hereof. (xiii) Amended and Restated Certificate of Incorporation of LIVE. The Amended and Restated Certificate of Incorporation of LIVE shall have been filed with the Secretary of State of the State of Delaware. Section 10.b Conditions to Obligation of Carolco to Effect the Merger. The obligation of Carolco to effect the Merger shall be subject to the fulfillment at or prior to the Effective Date of the following additional conditions, any or all of which may be waived by Carolco at its option, except as may be required by law: (i) Performance of Obligations; Representations and Warranties; No Material Adverse Change. LIVE and CAC shall have performed and satisfied in all material respects each of their covenants and agreements required or contemplated by this Agreement to be performed by them on or prior to the Effective Date; each of the representations and warranties of LIVE and CAC contained in this Agreement that is qualified by materiality shall be true and correct on and as of the Effective Date as if made on and as of such date and each of the representations and warranties that is not so qualified shall be true and correct in all material respects on and as of the Effective Date as if made on and as of such date, in each case except as contemplated or permitted by this Agreement; there shall have been no Material Adverse Change with respect to LIVE after the date of this Agreement; and Carolco shall have received a certificate of LIVE, signed by the Chief Executive Officer and the Chief Financial Officer of LIVE, to that effect. (ii) [Intentionally Deleted.] (iii) Tax Opinion. Carolco shall receive an opinion of Gipson Hoffman & Pancione, in form and substance satisfactory to Carolco, dated the Effective Date, substantially to the effect that on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing as of the Effective Date: (1) The Merger will constitute a reorganization for federal income tax purposes within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code, and Carolco, LIVE and CAC will each be a party to that reorganization within the meaning of Section 368(b) of the Code. (2) No gain or loss will be recognized by LIVE, Carolco or CAC as a result of the Merger. (3) No gain or loss will be recognized by the holders of Carolco Common Stock or Carolco Series A Preferred Stock upon the conversion of such Carolco Common Stock or Carolco Series A Preferred Stock into shares of LIVE Common Stock or LIVE Series D Preferred Stock, respectively, by reason of the consummation of the Merger, except with respect to cash, if any, received in lieu of fractional shares of LIVE Common Stock. (4) The aggregate tax basis of the shares of LIVE Common Stock or LIVE Series D Preferred Stock into which shares of Carolco Common Stock or Carolco Series A Preferred Stock are converted pursuant to the Merger will be the same as the aggregate tax basis of shares of Carolco Common Stock or Carolco Series A Preferred Stock converted into such LIVE Common Stock or LIVE Series D Preferred Stock in the Merger, decreased by the amount of any tax basis allocable to the fractional shares of LIVE Common Stock in lieu of which cash was received. (5) The holding period for shares of LIVE Common Stock or LIVE Series D Preferred Stock into which shares of Carolco Common Stock or Carolco Series A Preferred Stock are converted pursuant to the Merger will include the period that such shares of Carolco Common Stock or Carolco Series A Preferred Stock were held, provided such shares of Carolco Common Stock or Carolco Series A Preferred Stock were held as capital assets on the Effective Date. In rendering such opinion, Gipson Hoffman & Pancione may receive and rely upon representations of fact contained in certificates of Carolco, LIVE, CAC and others, and the obligation of Gipson Hoffman & Pancione to deliver the opinion contemplated in this Section 10.2(c) shall be subject to the receipt by Gipson Hoffman & Pancione of the Investor Representation Agreements contemplated by Section 6.4(c). (iv) Opinion of Counsel to LIVE and CAC. Carolco shall have received the opinion of Sidley & Austin, counsel to LIVE, dated the Effective Date, addressed to Carolco, in the form attached hereto as Exhibit 10.2(d). (v) Redemption of LIVE Series B Preferred Stock. LIVE shall have redeemed all outstanding shares of the LIVE Series B Preferred Stock in accordance with the provisions of the Certificate of Designations, Preferences and Rights governing the LIVE Series B Preferred Stock. (vi) No Additional Indebtedness. LIVE shall not have incurred any indebtedness (as defined in Section 5.13(a)) from the date hereof through the Effective Date other than (i) borrowings under its existing credit facility with Chemical Bank and any extensions or replacements thereof (the "LIVE Credit Facility") which borrowings may be used solely for working capital purposes or for the partial repayment of amounts owed on the LIVE 12% Notes as permitted by Section 8.1(a)(i)(C) or for the redemption of the LIVE Series B Preferred Stock as contemplated in Section 10.2(e) hereof and (ii) other borrowings of up to $17,000,000 which may be used solely for the redemption of the LIVE Series B Preferred Stock as contemplated in Section 10.2(e) hereof. (vii) Amendments to LIVE Increasing Rate Notes Indenture. LIVE shall have received amendments to the LIVE Increasing Rate Notes Indenture in form, scope and substance and on terms set forth in Exhibit 9.3(a). (viii) Amendments to LIVE 12% Indenture. The LIVE 12% Indenture shall have been amended to extend the maturity date to at least ninety days after the maturity date of the LIVE Credit Facility and LIVE shall have received other amendments to such indenture in form, scope and substance and on terms set forth in Exhibit 9.3(b). (ix) LIVE Rights Agreement. The LIVE Rights shall no longer be outstanding. (x) Assets of LIVE. Neither LIVE nor its Subsidiaries shall have disposed of or written-down the carrying value of any assets of LIVE or its Subsidiaries except with respect to plans previously disclosed to Carolco with respect to Strawberries and VCL and except for immaterial write-downs and write-offs in the ordinary course of business and consistent with past practice. (xi) Sale of Strawberries and VCL. If LIVE shall have sold Strawberries or VCL, the terms of such sales shall have been on terms and conditions reasonably satisfactory to Carolco. Section 10.c Conditions to Obligations of LIVE and CAC to Effect the Merger. The obligations of LIVE and CAC to effect the Merger shall be subject to the fulfillment at or prior to the Effective Date of the following additional conditions, any or all of which may be waived by LIVE and CAC at their option, except as may be required by law: (i) Performance of Obligations; Representations and Warranties; No Material Adverse Change. Carolco shall have performed and satisfied in all material respects each of its covenants and agreements required or contemplated by this Agreement to be performed on or prior to the Effective Date; each of the representations and warranties of Carolco contained in this Agreement that is qualified by materiality shall be true and correct on and as of the Effective Date as if made on and as of such date and each of the representations and warranties that is not so qualified shall be true in all material respects on and as of the Effective Date as if made on and as of such date, in each case except as contemplated or permitted by this Agreement; there shall have been no Material Adverse Change with respect to Carolco after the date of this Agreement; and LIVE and CAC shall have received a certificate of Carolco, signed by the Chief Executive Officer and Chief Financial Officer of Carolco, to that effect. (ii) [Intentionally Deleted.] (iii) Tax Opinion. LIVE shall have received an opinion of Sidley & Austin, in form and substance satisfactory to LIVE, dated the Effective Date, substantially to the effect that on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing as of the Effective Date: (1) The Merger will constitute a reorganization for federal income tax purposes within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code, and Carolco, LIVE and CAC will each be a party to that reorganization within the meaning of Section 368(b) of the Code. (2) No gain or loss will be recognized by Carolco, LIVE or CAC as a result of the Merger. (3) No gain or loss will be recognized by the holders of LIVE Common Stock or LIVE Series C Preferred Stock as a result of the Merger. In rendering such opinion, Sidley & Austin may receive and rely upon representations of fact contained in certificates of Carolco, LIVE, CAC and others. (iv) Opinion of Counsel to Carolco. LIVE and CAC shall have received the opinion of Gipson Hoffman & Pancione, counsel to Carolco, dated the Effective Date, addressed to LIVE and CAC, in the form of Exhibit 10.3(d). (v) Assets of Carolco. Neither Carolco nor its Subsidiaries shall have disposed of or written-down the carrying value of any assets of Carolco or its Subsidiaries except for immaterial write-downs and write-offs in the ordinary course of business and consistent with past practice. ARTICLE 11 TERMINATION, AMENDMENT AND WAIVER Section 11.a Termination. This Agreement may be terminated and the Merger herein contemplated may be abandoned at any time prior to the Effective Date, whether before or after any approval by the stockholders of LIVE and the stockholders of Carolco: (i) by mutual consent of LIVE and Carolco, as authorized by the boards of directors of each of them; (ii) by LIVE if (i) Carolco shall have failed to comply in any material respect with any of its material covenants or agreements contained in this Agreement required to be complied with by Carolco prior to the date of such termination, which failure to comply has not been cured within five (5) business days following receipt by Carolco of notice of such failure to comply; (ii) there has occurred (A) a material breach by Carolco of any representation or warranty that is qualified as to materiality either when made or at the Effective Date or (B) a breach by Carolco of any representation or warranty that is not qualified as to materiality when made or at the Effective Date, in each case which breach has not been cured within five (5) business days following receipt by Carolco of notice of the breach; or (iii) the stockholders of Carolco voting at the Carolco Stockholder Meeting shall have failed to approve this Agreement and the transactions contemplated hereby as contemplated in Section 9.1(a) hereof; (iii) by Carolco if (i) LIVE or CAC or any of their Subsidiaries shall have failed to comply in any material respect with any of their material covenants or agreements contained in this Agreement required to be complied with by LIVE or CAC or any of their Subsidiaries prior to the date of such termination, which failure to comply has not been cured within five (5) business days following receipt by LIVE or CAC, as the case may be, of notice of such failure to comply; or (ii) there has occurred (A) a material breach by LIVE or CAC of any representation or warranty that is qualified as to materiality either when made or at the Effective Date or (B) a breach by LIVE or CAC of any representation or warranty that is not qualified as to materiality when made or at the Effective Date, in each case which breach has not been cured within five (5) business days following receipt by LIVE or CAC, as the case may be, of notice of the breach; or (iii) the stockholders of LIVE voting at the LIVE Stockholder Meeting shall have failed to approve this Agreement and the transactions contemplated hereby as contemplated in Section 9.1(b) hereof; (iv) by either LIVE or Carolco, if the other party accepts a competing "takeover proposal" or "offer" as provided in Section 8.3 hereof; (v) by either LIVE or Carolco, if such party shall have exercised its best efforts to effect the Merger and, notwithstanding such best efforts, if the Merger has not been effected on or prior to the close of business on December 31, 1994, unless an extension of such date is agreed to by the parties in writing on or before such date; (vi) by LIVE, if the Board of Directors of Carolco shall have modified or withdrawn its recommendation of the Merger or declaration that the Merger is advisable or if the Board of Directors of Carolco shall have recommended to stockholders of Carolco any takeover proposal of any other person or shall have resolved to do any of the foregoing, in which case costs shall be shared as set forth in Section 9.7; (vii) by Carolco, if the Board of Directors of LIVE and its Advisory Committee considering the Merger shall have modified or withdrawn its recommendation of the Merger or declaration that the Merger is advisable or if the Board of Directors of LIVE shall have recommended to stockholders of LIVE any takeover proposal of any other person or shall have resolved to do any of the foregoing, in which case costs shall be shared as set forth in Section 9.7; or (viii) by either LIVE or Carolco if any permanent injunction or other order of a court or other competent authority preventing the consummation of the Merger shall have become final and non-appealable. Section 11.b Effect of Termination. In the event of termination of this Agreement by either LIVE or Carolco or both, as provided in Section 11.1, this Agreement shall forthwith become void and there shall be no further liability hereunder on the part of Carolco, LIVE or CAC or their respective officers or directors except with respect to the provisions concerning fees and expenses contained in Section 9.7, and except with respect to provisions concerning confidentiality and the return of documents contained in Section 9.4, which shall survive the termination; provided, however, that nothing contained in this Section 11.2 shall relieve any party hereto from any liability for any breach of this Agreement occurring on or prior to the date of termination hereof. Section 11.c Amendment. This Agreement may be amended by the parties hereto, by or pursuant to action taken by their respective Boards of Directors (and in the case of LIVE, with the consent of its Advisory Committee), at any time before or after approval of the Merger and the transactions contemplated hereby by the stockholders of Carolco or the approval of the Merger and the transactions contemplated hereby by the stockholders of LIVE, but, after any such approval by stockholders of Carolco or LIVE, no amendment shall be made which (i) alters or changes the amount or kind of shares of any class or series of capital stock of LIVE, (ii) alters or changes any terms of the Certificate of Incorporation of LIVE or the Surviving Corporation to be effected by the Merger, (iii) alters or changes any of the terms and conditions of the Agreement if such alteration or change would adversely affect the holders of any class or series of capital stock of LIVE, Carolco or CAC, (iv) changes the Exchange Ratio provided in Section 4.1 or (v) in any way materially adversely affects the rights of such stockholders, without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 11.d Waiver. At any time prior to the Effective Date, the parties hereto pursuant to action taken by their respective Boards of Directors (and in the case of LIVE, with the consent of its Advisory Committee of the Board of Directors) may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto by the other parties hereto and (iii) waive compliance by the other parties hereto with any of the agreements or conditions contained herein which may legally be waived (except that neither CAC nor LIVE may waive any material breach hereunder by the other and except that in the event of a waiver of any material condition, covenant or breach, each of the Carolco Investors, in the event of a waiver by Carolco, and each of the LIVE Investors, in the event of a waiver by LIVE, shall be entitled to rescind such Carolco Investor's or LIVE Investor's Investor Representation Agreement within five (5) business days of such waiver). Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. Section 11.e Approval by LIVE Special Committee. The approval of the LIVE Special Committee shall be required for any amendment or waiver which has the effect of reducing or eliminating the requirement that 100% of the LIVE Series B Preferred Stock be redeemed as a condition to the Merger. ARTICLE 12 GENERAL PROVISIONS Section 12.a Non-Survival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Date. Section 12.b Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, sent by overnight courier or telecopied (with a confirmatory copy sent by overnight courier) to the parties (with courtesy copies to the LIVE Investors and Carolco Investors) at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to LIVE or CAC, to LIVE Entertainment Inc. 15400 Sherman Way, Suite 500 Van Nuys, California 91406 Attention: Michael J. White, General Counsel Facsimile: (818) 908-9539 with a copy to: Sidley & Austin 2049 Century Park East 39th Floor Los Angeles, California 90067 Attention: Gary J. Cohen, Esq. Facsimile: (310) 556-6502 (ii) if to Carolco, to Carolco Pictures Inc. 8800 Sunset Boulevard Los Angeles, California 90069 Attention: Robert W. Goldsmith, General Counsel Facsimile: (310) 652-1343 with a copy to: Gipson Hoffman & Pancione 1901 Avenue of the Stars Suite 1100 Los Angeles, California 90067 Attention: Lawrence R. Barnett, Esq. Facsimile: (310) 556-8945 (iii) if to Pioneer, to Pioneer LDCA, Inc. 2265 East 220th Street Long Beach, California 90810 Attention: Tetsuro Kudo Facsimile: (310) 952-2420 with a copy to: Pioneer LDC, Inc. 1-20-6 Ebisuminami Shibuya-ku, Tokyo 150 JAPAN Attention: Mr. Ryuichi Noda Facsimile: 011 813 5721 2040 and Pryor, Cashman, Sherman & Flynn 410 Park Avenue New York, New York 10022 Attention: Blake Hornick, Esq. Facsimile: (212) 326-0806 (iv) if to Cinepole, to Cinepole Productions B.V. P.O. Box 990 1000 AZ Amsterdam THE NETHERLANDS Facsimile: with a copy to: Coudert Brothers 52, Avenue Des Champs-Elysees 75008 Paris FRANCE Attention: Jonathan M. Wohl, Esq. Facsimile: 011 331 4359 6655 and Le Studio Canal+ (U.S.) 301 North Canon Drive, Suite 228 Beverly Hills, California 90210 Attention: Richard J. Garzilli, Esq. Facsimile: (310) 246-9772 and Coudert Brothers 1055 West 7th Street, 20th Floor Los Angeles, California 90017-2503 Attention: John A. St. Clair, Esq. Facsimile: (213) 689-4467 (v) if to RCS, to RCS Video International Services B.V. Avv. Enzo Pulitano Affari Legali e Societari RCS Editori SpA Corso Garibaldi 86 20121 Milan ITALY Facsimile: 011 392 2584 3073 with a copy to: Werbel McMillin & Carnelutti 711 Fifth Avenue New York, New York 10022 Attention: Paul D. Downs, Esq. Facsimile: (212) 832-3353 (vi) if to MGM Holdings Corporation, to MGM Holdings Corporation c/o Metro-Goldwyn-Mayer Inc. 2500 Broadway Street Santa Monica, California 90404 Attention: Michael S. Hope Facsimile: (310) 449-3090 with a copy to: White & Case 633 West Fifth Avenue, Suite 1900 Los Angeles, California 90071 Attention: David G. Johnson, Esq. Facsimile: (213) 620-0758 (vii) if to New Carolco Investments B.V., to New Carolco Investments B.V. c/o Schutte, Zewald & Jorna Parklaan 46, 3016 BC Rotterdam THE NETHERLANDS Facsimile: 011 3110 4361 880 with a copy to: Skadden, Arps, Slate, Meagher & Flom 300 South Grand Avenue Suite 3400 Los Angeles, California 90071 Attention: Brian J. McCarthy, Esq. Facsimile: (213) 687-5600 Section 12.c Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The phrases "date of this Agreement," the "date hereof" and words of similar impact, unless the context otherwise requires, shall be deemed to refer to August 10, 1994. Unless expressly indicated herein to the contrary, and when the context so dictates, the masculine includes the feminine and the singular includes the plural. Section 12.d Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Section 12.e Entire Agreement; No Third-Party Beneficiaries. This Agreement, including the documents and instruments referred to herein, (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and there are no other covenants, promises, agreements, conditions or understandings, whether oral or written, among the parties hereto, and (b) except for the provisions of Sections 9.9(a) and 9.14, is not intended to confer upon any person other than the parties any rights or remedies hereunder. Section 12.f Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Section 12.g Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties, except that CAC may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to LIVE or to any direct wholly-owned subsidiary of LIVE, but no such assignment shall relieve CAC of any of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. IN WITNESS WHEREOF, LIVE, CAC and Carolco have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above. LIVE ENTERTAINMENT INC. By: /s/ Roger A. Burlage Name: Roger A. Burlage Title: President and Chief Executive Officer Attest: /s/ Robert L Denton Name: Robert L. Denton Title: Vice President and Chief Accounting Officer CAROLCO ACQUISITION CORP. By:/s/ Roger A. Burlage Name: Roger A. Burlage Title: President and Chief Executive Officer Attest: /s/ Steven A. Mangel Name: Steven A. Mangel Title: Senior Vice President/Legal and Business Affairs CAROLCO PICTURES INC. By: /s/ Mario F. Kassar Name: Mario F. Kassar Title: Chairman of the Board and Chief Executive Officer Attest: /s/ Robert W. Goldsmith Name: Robert W. Goldsmith Title: Senior Vice President and General Counsel EX-9.3(A) 3 EXHIBIT 9.3(A) Amendments to LIVE 12% Indenture For purposes of this Exhibit 9.3(a) only, the LIVE 12% Notes shall be referred to as the "Notes" and the LIVE 12% Indenture shall be referred to as the "Indenture". The Notes and the Indenture will be amended in the following respects: 1. The maximum principal amount which may be outstanding under the Notes will equal $54,000,000. 2. The maturity date of the Notes will be extended until a date 90 days after the maturity date of the LIVE Credit Facility to be in place at either LIVE or LIVE Home Video Inc. ("LHV") on the Effective Date. 3. The covenants in the Indenture will be amended to make such covenants no less favorable to LIVE or LHV than the covenants in the LIVE Credit Facility. The Notes and the Indenture will also be amended as necessary to consummate the Merger and the transactions contemplated by the Merger Agreement. EX-3.3A 4 EXHIBIT TO EX-2.1 Exhibit 3.3A Board of Directors and Committees of Carolco Entertainment Inc. at Effective Date Directors Mario F. Kassar (Chairman) Lynwood Spinks Roger A. Burlage Hector Patrick Dowd Guy-Etienne Dufour Michael E. Garstin Paolo Glisenti Olivier Granier Michael S. Hope Kaneo Ito Rene-Claude Jouannet Tetsuro Kudo Pierre Lescure Gordon C. Luce Michael Meltzer Ryuichi Noda Anthony J. Scotti Joseph A. Scudero Adam Singer Masaaki Sono Gregory R. Pierson Supervisory Committee Mario F. Kassar Olivier Granier Michael S. Hope Ryuichi Noda Paolo Glisenti Michael E. Garstin Stock Option Committee Hector Patrick Dowd Gordon C. Luce Joseph A. Scudero Independent Committee Hector Patrick Dowd Gordon C. Luce Joseph A. Scudero Audit Committee Hector Patrick Dowd Michael E. Garstin Gordon C. Luce EX-3.2 5 EXHIBIT TO EX-2.1 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS for the regulation, except as otherwise providedby statute or the Certificate of Incorporation of Carolco Entertainment Inc. Article 1 General Provisions Section 1.1 Principal Executive Office The principal executive office of the Corporation shall be located at 8800 Sunset Boulevard, Los Angeles, California 90069. The Board of Directors shall have the power to change the principal office to another location and may fix and locate one or more subsidiary offices at any place. Section 1.2 Number of Directors The affairs of the Corporation shall be managed by a Board of Directors (the "Board") consisting of not less than three (3) nor more than twenty-one (21) directors. Directors need not be Stockholders or citizens or residents of the United States. The exact number of directors within the limits specified shall be twenty-one (21) until changed by an amendment to these Bylaws duly adopted by the Board or by the Stockholders. Section 1.3 Registration of Shares The Corporation shall recognize each person registered in its stock ledger as the exclusive owner and holder of the shares registered in his name and as the "Stockholder" for all purposes hereunder with the exclusive rights inter alia to vote the shares, to receive dividends declared with respect to the shares, to transfer the shares to others, and to exercise any other rights of Stockholders. The Corporation shall have no obligation to recognize any equitable or other claim or interest in any shares on the part of any person or persons other than the registered owner, as set forth in the stock ledger, whether or not the Corporation shall have any notice thereof, except as may otherwise be provided by the laws of the State of Delaware. "Shares" for purposes hereof, shall mean shares of the Corporation's stock authorized by its Certificate of Incorporation and registered in the stock ledger as issued and outstanding, including any one or more classes of stock so authorized, and whether or not such share is deemed to have voting or other privileges. Article 2 Shares and Stockholders Section 2.1 Share Certificates A. In General The Corporation shall issue a certificate or certificates representing shares of its capital stock. Each certificate so issued shall be signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board or the President or a Vice President and by the Chief Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation and shall state the name of the record owner thereof and represent the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. B. Form of Certificates There shall be set forth on the face or back of a certificate which the Corporation shall issue to represent a class or series of stock one of the following: 1. A statement of the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights; or 2. A summary of the statement described in Subsection 2.1.B.1 above. If a security of the Corporation is subject to a restriction on the transfer or registration thereof, such restriction shall be noted, in writing, conspicuously upon the certificate representing the security. C. Fractional Share Interests The Corporation may, but shall not be required to, issue certificates representing a fraction of a share and, in this event, the holder thereof shall have all the rights appurtenant to ownership of that interest in the Corporation. If the Corporation elects not to issue certificates representing a fraction of a share to the persons entitled thereto, it shall, at its election, either: 1. Arrange for disposition of the fractional interest by those entitled thereto. 2. Pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined. 3. Issue scrip or warrants in registered or bearer form which entitles the holder to receive a full share upon surrender of such scrip or warrants aggregating one or more full shares, which scrip or warrants may, if the Board elects, either become (i) void if not so surrendered on or before a specified date, or (ii) subject to such other conditions or limitations as may be designated by the Board. Section 2.2 Transfer of Certificates Where a certificate for shares is presented to the Corporation or its transfer clerk or transfer agent with a request to register a transfer of shares, the Corporation is under a duty to register the transfer, cancel the certificate presented, and issue a new certificate if: A. The certificate is endorsed or the instructions originated by the appropriate person or persons; B. Reasonable assurance is given that those endorsements or instructions are genuine and effective; C. The Corporation has no duty to inquire into adverse claims or has discharged any such duty; D. Any applicable law relating to the collection of taxes has been complied with; and E. The transfer is in fact rightful or is to a bona fide purchaser. Section 2.3 Lost Certificates Where a certificate is alleged to have been lost, destroyed or stolen, the Corporation shall issue a new certificate in place of the original if the owner: A. So requests, in writing, before the Corporation has notice that the certificate has been acquired by a bona fide purchaser; and B. If so requested by the Board, gives the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, destruction or theft of such certificate or the issuance of such new certificate. Except as above provided, no new certificate for shares shall be issued in lieu of an old certificate unless the Corporation is ordered to do so by a court in a judgment in an action brought in a court of appropriate jurisdiction. Section 2.4 Meetings of Stockholders A. Place of Meetings Meetings of Stockholders shall be held at any place within or without the State of Delaware designated by the Board. In the absence of any such designation, Stockholders' meetings shall be held at the principal executive office of the Corporation. B. Annual Meetings An annual meeting of the Stockholders of the Corporation shall be held for the election of directors on the date and at the time fixed, from time to time, by the Board. The first annual meeting shall be held on a date within thirteen (13) months after the organization of the Corporation and each subsequent annual meeting shall be held on a date within thirteen (13) months after the immediately preceding annual meeting. Any other proper subject for Stockholder consideration may be transacted which may be presented at the meeting, whether or not included in the notice of the meeting. C. Special Meetings Special meetings of the Stockholders may be called by the Board, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than twenty-five percent (25%) of the votes at the meeting. Upon request in writing to the Chairman of the Board, the President, any Vice President or the Secretary by any person (other than the Board) entitled to call a special meeting of Stockholders, the officer forthwith shall cause notice to be given to the Stockholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the persons entitled to call the meeting may give the notice. D. Notice of Meetings 1. Except to the extent otherwise provided by applicable law or unless lapse of time shall be waived, written notice of any Stockholders' meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each Stockholder entitled to vote thereat. Each notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The notice of any meeting may be accompanied by any additional documents, statements or information which may be selected by the persons calling the meeting or which may be prescribed by any applicable law or regulation. 2. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the Stockholder at his address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. E. Adjourned Meetings and Notice Thereof Any meeting of Stockholders may be adjourned from time to time by the vote of a majority of the shares represented either in person or by proxy whether or not a quorum is present. When a Stockholders' meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. However, if the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. F. Waiver of Notice The transactions of any meeting of Stockholders, however called and noticed, and wherever held, are as valid as though they had taken place at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. No Stockholder may object to any failure to comply with the provisions of this Section if either (i) at any time before or after the meeting he exercises a written waiver of notice or (ii) he attends one meeting in person or by proxy, except if he attends solely for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Any waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of Stockholders. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. G. Quorum/Majority Vote Except as otherwise provided by the laws of the State of Delaware, a majority of shares entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business. If a quorum is present, the affirmative vote of the majority of the voting shares represented at the meeting and entitled to vote on any matter shall be the act of the Stockholders, unless the vote of a greater number or voting by classes is required by law or under the Certificate of Incorporation of the Corporation. The Stockholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough Stockholders to leave less than a quorum, provided that any action taken (other than adjournment) must be approved by at least a majority of the shares required to constitute a quorum. H. Conduct of Meetings Meetings of Stockholders shall be presided over by one of the following officers in the following order by seniority, if present and acting: Chairman of the Board, Vice Chairman of the Board, if any, the President or any Vice President selected in the order of chronological age. The Secretary of the Corporation or, in his absence, any Assistant Secretary shall act as Secretary of the meeting. In lieu of the foregoing persons, the Board may designate a Chairman and/or Secretary at any meeting of the Stockholders. All meetings shall be conducted by reference to Roberts Rules of Order or other parliamentary system selected by the chairman of the meeting and not inconsistent with these Bylaws, the Certificate of Incorporation or any applicable law. I. Nominations for Directors Nominations for the election of directors may be made at any meeting at which directors are to be elected by the Board or its designees or by any Stockholder entitled to vote for directors generally at that meeting. Nomination may be made by Stockholders only if written notice thereof is given to the Secretary of the Corporation at least ten (10) days in advance of the meeting or two (2) days after service of notice of the meeting (whichever shall occur last). Said notice should identify the person or persons whom the Stockholder wishes to nominate and give the residential address of the nominee and the nominee's business qualifications for such position. The chairman of the meeting may refuse to acknowledge any nominations not made in accordance with the foregoing procedure or in accordance with applicable law. Section 2.5 Action Without a Meeting Any action required or permitted to be taken at any annual or special meeting of Stockholders may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery (by hand or by certified and registered mail, return receipt requested) to its registered office in the State of Delaware, its principal place of business, or to the Secretary of the Corporation. Where the approval of Stockholders is given without a meeting by less than unanimous written consent, unless the consents of all Stockholders entitled to vote have been solicited in writing, the Secretary shall give prompt notice of the corporate action approved by the Stockholders without a meeting. Such notice shall be given in the same manner as notice of Stockholders' meetings. All such written consents shall be filed with the minutes of proceedings of the Stockholders and actions authorized or taken under such written consents shall have the same force and effect as those adopted by vote of the Stockholders at any annual or special meeting thereof. Section 2.6 Voting of Shares A. In General Except as may otherwise be prescribed by the provisions of the Certificate of Incorporation, each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the applicable law in the State of Delaware prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the Certificate of Incorporation and these Bylaws. B. Secret Voting by Ballot Elections for directors and voting in other matters need not be by secret ballot unless any Stockholder demands voting by secret ballot on the applicable issue at the meeting and before the voting begins. C. Voting of Shares by Certain Holders Shares of capital stock of the Corporation standing in the name of another Corporation, domestic or foreign, and entitled to vote may be voted by such officer, agent or proxy as the by-laws of such other Corporation may prescribe or, in the absence of such provision, as the board of directors of such other Corporation may determine. Shares of capital stock of the Corporation standing in the name of a deceased person, a minor, an incompetent or a Corporation declared bankrupt and entitled to vote may be voted by an administrator, executor, guardian, conservator or trustee, as the case may be, either in person or by proxy, without transfer of such shares into the name of the official so voting. A Stockholder whose shares of capital stock of the Corporation are pledged shall be entitled to vote such shares unless on the transfer books of the Corporation the pledgor has expressly empowered the pledgee to vote such shares, in which case only the pledgee, or such pledgee's proxy, may represent such shares and vote thereon. Shares of capital stock of the Corporation belonging to the Corporation, or to another corporation if a majority of the shares entitled to vote in the election of directors of such other corporation shall be held by the Corporation, shall not be voted at any meeting of Stockholders and shall not be counted in determining the total number of outstanding shares for the purpose of determining whether a quorum is present. Nothing in this Section 2.6.C shall be construed to limit the right of the Corporation to vote shares of capital stock of the Corporation held by it in a fiduciary capacity. Section 2.7 Proxies Every person entitled to vote for directors or any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Corporation. A proxy shall be deemed signed if the Stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the Stockholder or Stockholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing signed by the person and delivered to the Corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of the law applicable in the State of Delaware. Section 2.8 Inspectors of Election A. Appointment The Board shall, in advance of any meeting of Stockholders, appoint one or more inspectors (individually an "Inspector," and collectively the "Inspectors") to act at such meeting and make a written report thereof. The Board may designate one or more persons as alternate Inspectors to replace any Inspector who shall fail to act. If no Inspector or alternate shall be able to act at such meeting, the person presiding at such meeting shall appoint one or more other persons to act as Inspectors thereat. Each Inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of Inspector with strict impartiality and according to the best of his or her ability. B. Duties The Inspectors shall (i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each, (ii) determine the shares of capital stock of the Corporation represented at such meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the Inspectors and (v) certify their determination of the number of such shares represented at such meeting and their count of all votes and ballots. The Inspectors may appoint or retain other persons or entities to assist them in the performance of their duties. The date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at such meeting shall be announced at such meeting. No ballots, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by any Stockholder shall determine otherwise. In determining the validity and counting of proxies and ballots, the Inspectors shall be limited to an examination of the proxies, ballots and the regular books and records of the Corporation, except that the Inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by a Stockholder of record to cast or more votes than such Stockholder holds of record. If the Inspectors consider other reliable information for the limited purpose permitted herein, the Inspectors, at the time they make their certification pursuant to this Section 2.8.B, shall specify the precise information considered by them, including the person or persons from whom they obtained such information, when the information was obtained, the means by which such information was obtained and the basis for the Inspectors' belief that such information is accurate and reliable. Section 2.9 Record Date In order that the Corporation may determine the Stockholders entitled to notice of or to vote at any meeting or entitled to express consent to any corporate action without a meeting or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days prior to the date of such meeting nor more than sixty (60) days prior to any such action. If no record date is fixed: 1. The record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the date next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. 2. The record date for determining Stockholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board has been taken, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation's registered agent in the State of Delaware, its principal place of business, or to the Secretary. 3. The record date for determining Stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of Stockholders of record entitled to notice of or to vote at a meeting of Stockholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting. The stock ledger shall be the only evidence as to who are the Stockholders entitled to examine the stock ledger, the stocklist or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders. Article 3 Directors Section 3.1 Powers Subject to the provisions of the laws of the State of Delaware and the Certificate of Incorporation, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board. The Board may delegate the management of the day-to-day operations of the business of the Corporation to a management company or other person provided that the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Section 3.2 Committees of the Board The Board shall, by resolution adopted by a majority of the whole Board, designate a Supervisory Committee consisting of six (6) directors, to serve at the pleasure of the Board. Such resolution shall provide that during intervals between meetings of the Board, the Supervisory Committee shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation in all cases; provided, however, that the Supervisory Committee shall not have the power or authority to (i) take any of the actions set forth in nos. 1-6 in the next paragraph, (ii) contravene any specific actions or directions of the Board, or (iii) act on any matter upon which committees may not act as otherwise provided in the Delaware General Corporation Law. Such resolution shall also designate one member of the Supervisory Committee as the "Management Member", one member as the "Independent Member" and the remaining four members as "Other Members". The Management Member and the four Other Members shall constitute a quorum at meetings of the Supervisory Committee and no action shall be taken by the Supervisory Committee without the affirmative vote of each of the four Other Members; provided, however, that if the Management Member or any Other Member is not present at a meeting of the Supervisory Committee after having been given five Business Days (defined below) prior written notice of such meeting, then the attendance of such member shall not be required for purposes of a quorum or, with respect to the Other Members, unanimous voting on any action to be taken at such meeting, so long as at least three members of the Supervisory Committee are present, including at least two of the Other Members, and so long as the action is approved by all Other Members present. "Business Day" means any day other than Saturday, Sunday or any other day on which commercial banks in Los Angeles, California are authorized to be closed for business. The Board may, by resolution adopted by a majority of the whole Board designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the Board. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether a quorum or not, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board and subject to the provisions of the applicable law in the State of Delaware, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the corporate seal to be affixed to all papers which may require it, but neither the Supervisory Committee, the Audit Committee, nor any other committee shall have the power or authority with respect to: 1. Amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board as provided in Section 151(a) of the Delaware General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of shares for, shares of any other series of the same class or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series). 2. Adopting an agreement of merger or consolidation under Sections 251 or 252 of the Delaware General Corporation Law. 3. Recommending to the Stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets. 4. Recommending to the Stockholders a dissolution of the Corporation or a revocation of a dissolution. 5. Amending the Bylaws of the Corporation. 6. Unless the resolutions, Bylaws, or Certificate of Incorporation expressly so provide, declaring a dividend, authorizing the issuance of stock or adopting a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. Section 3.3 Election and Term of Office The directors shall be elected at each annual meeting of Stockholders but, if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of Stockholders held for that purpose. All directors shall hold office until the expiration of the term for which elected and until their respective successors are elected and qualified. Section 3.4 Vacancies A vacancy or vacancies in the Board shall be deemed to exist in case of death, resignation or removal of any director, or if the Stockholders fail, at any annual or special meeting of Stockholders at which any director or directors are elected, to elect to fill the full authorized number of directorships, each of which has previously been filled. A newly created directorship or directorships shall be deemed to exist if the authorized number of directors is increased. The Board shall have the power to declare vacant the office of a director either if he is declared of unsound mind by order of court or finally convicted of a felony. Except for a vacancy created by the removal of a director, vacancies on the Board may be filled by a majority of the directors then in office, whether or not less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual or a special meeting of the Stockholders. A vacancy on the Board created by the removal of a director may only be filled by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of a majority of the outstanding shares entitled to vote. The Stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Insofar as a director or directors are elected by a class or series of stock, vacancies or newly created directorships are to be filled only by the remaining director or directors elected by such class or series or by the vote of a majority of the shares of such class or series. Section 3.5 Removal Subject to the rights of any shares having preferences over the common stock of the Corporation as to dividends or upon liquidation to elect directors under specified circumstances, the entire Board or any director may be removed from office, with or without cause, but only by the affirmative vote of the holders of a majority of the combined voting power of all the then outstanding shares entitled to vote generally in the election of directors, voting together as a single class. Section 3.6 Resignation Any director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, the Board or the Stockholders shall have the power to elect a successor to take office when the resignation is to become effective. Section 3.7 Meetings of the Board A. Regular Meetings Regular meetings of the Board shall be held at such time and place within or without the State of Delaware as may be determined from time to time by resolution of the Board or by written consent of all members of the Board or in these Bylaws. Regular meetings shall be held upon oral or written notice given by any means in sufficient time for the convenient assembly of directors; forty-eight (48) hours' notice delivered by mail or twelve (12) hours' notice delivered personally or by telephone, telegraph or telecopier or other similar means shall be deemed sufficient for the foregoing purpose. Any notice shall state the date, place and hour of the meeting. Notice of a meeting need not be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. B. Organization Meetings Immediately following each annual meeting of Stockholders, the Board shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business. Notice of such meetings is hereby dispensed with. C. Special Meetings Special meetings of the Board for any purpose or purposes shall be called at any time or place by the Chairman of the Board or by the President or by any Vice President or the Secretary or any two directors. Special meetings shall be held upon oral or written notice given by any means in sufficient time for the convenient assembly of directors; forty-eight (48) hours' notice delivered by mail or twelve (12) hours' notice delivered personally or by telephone, telegraph or telecopier or other similar means shall be deemed sufficient for the foregoing purpose. Any notice shall state the date, place and hour of the meeting. Notice of a meeting need not be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. D. Notice of Adjournment A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than twenty-four (24) hours, notice of such adjournment to another time and place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of adjournment, in the same manner as set forth above for special meetings in Section 3.7.C. E. Place of Meeting Meetings of the Board may be held at any place within or without the State of Delaware which has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, then such meeting shall be held at the principal executive office of the Corporation, or such other place designated by resolution of the Board. F. Presence by Conference Telephone Call Members of the Board or any committee designated by the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear each other. Such participation constitutes presence in person at such meeting. G. Quorum/Voting 1. A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business, provided, however, that in the absence of a quorum, a majority of the directors present at any directors' meeting, either regular or special, may adjourn any meeting to another time and place. If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of adjournment, in the same manner as set forth above for special meetings in Section 3.7.C. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board, unless a greater number be required by law, by the Certificate of Incorporation or by the provisions of these Bylaws; provided, however, that these Bylaws hereby authorize the Board to adopt operating resolutions requiring a greater than majority vote with respect to certain actions. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. 2. The affirmative vote of (i) at least eighty- five percent (85%) of the group of directors of the Corporation (the "Director Pool") composed of (A) all of the directors designated for election to the Board by each of Pioneer LDCA, Inc. ("Pioneer"), Cinepole Productions B.V. ("Cinepole"), RCS Video International Services B.V. ("RCS") and MGM Holdings Corporation ("MGM") (the "Director Designees"), (B) two directors designated by the Chairman of the Board of the Corporation (the "Management Director Designees") and (C) two independent directors elected to the Board by the Stockholders at large who are not Director Designees or Management Director Designees and who would qualify as a member of the audit committee of the Board pursuant to the rules of the New York Stock Exchange and who are designated as members of the Director Pool by New Carolco Investments, B.V., and (ii) directors designated for election to the Board by at least three (3) of the following four Stockholders: Pioneer, Cinepole, RCS and MGM, shall be required before the following actions, decisions, expenditures and obligations are taken, made or incurred in the name of and on behalf of the Corporation: (a) Any amendments to the Certificate of Incorporation or these Bylaws which would alter (A) the voting rights of the holders of the common stock of the Corporation, the Series C Convertible Preferred Stock, par value $1.00 per share, of the Corporation ("Series C Preferred") or the Series D Convertible Preferred Stock, par value $1.00 per share, of the Corporation ("Series D Preferred"), (B) the number or classes of directors on the Board, (C) the notice and quorum requirements for meetings of the Board or Stockholders of the Corporation, (D) the constitution, powers or proceedings of the Supervisory Committee (as described in Section 3.2 above), (E) the constitution of the Director Pool or (F) this Section 3.7.G.2; (b) Any merger, consolidation, liquidation, dissolution or winding up of the Corporation or any subsidiary of the Corporation which is material to the business and operations of the Corporation and its subsidiaries taken as a whole; (c) The disposition of any asset or assets of the Corporation or any subsidiary of the Corporation, other than in the ordinary course of business, with an aggregate fair market value in excess of $10,000,000; (d) Any acquisition by the Corporation or any subsidiary of the Corporation of any business of another person, or any property, securities, rights or other assets in one or a series of related transactions for a consideration in excess of $10,000,000; provided, that the Corporation may acquire rights to motion pictures or other related properties or assets in the ordinary course of business, or as permitted under the employment agreement, dated as of August 10, 1994, between Carolco Pictures Inc. and Mario F. Kassar, as assumed by the Corporation (the "Kassar Employment Agreement") and any amendments thereto, or pursuant to a resolution of the Board existing on October 20, 1993; (e) The creation, incurrence, assumption or guaranty by the Corporation or any subsidiary of the Corporation of any indebtedness, obligation or liability, whether direct or contingent, in excess of $10,000,000, except for (i) film production financing incurred by the Corporation or by special purpose subsidiaries of the Corporation engaged solely in motion picture production, (ii) "pay or play" obligations related directly to motion picture production and (iii) bank financing used for general corporate purposes of the Corporation and its subsidiaries in an aggregate amount not exceeding the amount of bank financing available to be drawn pursuant to its terms at the closing of the Securities Purchase Agreement, dated as of May 25, 1993, among the Corporation, Pioneer, Cinepole and MGM, plus $10,000,000 (collectively, "Permitted Indebtedness"). (f) The creation, incurrence, or assumption of any lien, mortgage, pledge, security interest, charge or encumbrance by the Corporation or any subsidiary of the Corporation with respect to any property, capital stock or asset of the Corporation or any subsidiary of the Corporation, which secures payment of indebtedness of the Corporation in excess of $10,000,000, except for liens or pledges securing Permitted Indebtedness. (g) The declaration or payment by the Corporation or any subsidiary of the Corporation (other than special purpose subsidiaries engaged solely in motion picture production) of any dividend on its common stock or any other capital stock junior to the Series C Preferred and the Series D Preferred (except that (A) any subsidiary of the Corporation may declare and pay dividends to the Corporation and (B) the Corporation may declare and pay dividends on the Series C Preferred or the Series D Preferred in accordance with the terms of the Certificate of Incorporation and applicable law). (h) The termination of, or material amendment, modification or supplement to (i) the Kassar Employment Agreement, (ii) the Co-Production Financing Commitment Agreement, dated as of August 19, 1993, among Carolco Pictures Inc. ("Carolco"), an affiliate of Cinepole and Tele-Communications, Inc. ("TCI"), and (iii) the Standby Purchase and Investment Agreement, dated as of July 29, 1993, among Carolco, Cinepole, an affiliate of Cinepole, Pioneer, RCS and TCI, as amended as of the effective date of the Agreement and Plan of Merger, dated as of August 10, 1994, between the Corporation, Carolco and Carolco Acquisition Corp. (the "Merger Agreement"). (i) Any investments, or series of investments, by the Corporation or any subsidiary of the Corporation in excess of $3,000,000, other than (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, (iii) commercial paper or other corporate obligations provided that, at the time of acquisition, if the security has less than an investment grade rating obtainable from either Standard & Poor's Corp. or Moody's Investors Services, Inc., then the Corporation shall not purchase the security if the result would be that the Corporation would (A) have invested more than 20% of its assets in the obligations of one issuer or (B) own more than 10% of a single issue of securities, (iv) demand deposits, certificates of deposit (including Eurodollar certificates of deposit) or bankers' acceptances issued by commercial banks, savings and loans or other financial institutions organized under the laws of the United States of America or any state thereof or the District of Columbia, each having capital and surplus of, in the case of any such institution organized under the laws of the United States or any political subdivision thereof, not less than $100,000,000 or, in the case of any such institution organized under the laws of any foreign jurisdiction, not less than $500,000,000 or whose commercial paper is rated "A-1" by Standard & Poor's Corp. or "P-1" by Moody's Investors Services, Inc. ("Qualifying Banks"), (v) repurchase agreements and reverse repurchase agreements with Qualifying Banks, (vi) money market funds organized under the laws of the United States of America or any state thereof and administered by securities dealers of recognized national standing, (vii) any investment in subsidiaries of the Corporation 95% of the capital stock of which is owned by the Corporation, (viii) negotiable instruments endorsed for deposit or collection or similar instruments in the ordinary course of business, and (ix) any investment outstanding on the effective date of the Merger Agreement and any extension, renewal refinancing or deferral of such investment provided that such extension, renewal, refinancing or deferral does not increase the amount of such investment outstanding on the date of such extension, renewal, refinancing or deferral. (j) Any agreement, understanding or arrangement by the Corporation or any subsidiary of the Corporation, or the amendment of any agreement, understanding or arrangement of the Corporation or any subsidiary of the Corporation, with respect to any of the foregoing matters. H. Waiver of Notice Whenever notice is required to be given to any director pursuant to Delaware law, the Corporation's Certificate of Incorporation, or these Bylaws, a written waiver thereof, signed by such director, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting except when the director attends the meeting for the express and sole purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 3.8 Action Without Meeting Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or any committee, as the case may be, consent in writing to such action and the writing or writings are filed with the minutes or proceedings of the Board or committee, as the case may be. Section 3.9 Fees and Compensation Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the Board. Section 3.10 Interested Directors The presence of a director, who is directly or indirectly a party in a contract or transaction with the Corporation, or between the Corporation and any other corporation, partnership, association or other organization in which such director is a director or officer or has a financial interest, may be counted in determining whether a quorum is present at any meeting of the Board or a committee thereof at which such contract or transaction is discussed or authorized, and such director may participate in such meeting to the extent permitted by applicable law, including Section 144 of the Delaware General Corporation Law. Article 4 Officers Section 4.1 Officers The officers of the Corporation shall consist of a Chairman of the Board or a President, or both, a Secretary, a Chief Financial Officer, and such additional officers as may be elected or appointed in accordance with Section 4.3 of these Bylaws and as may be necessary to enable the Corporation to sign instruments and share certificates. Any number of offices may be held by the same person. Section 4.2 Elections All officers of the Corporation, except such officers as may be otherwise appointed in accordance with Section 4.3, shall be chosen by the Board, and each shall hold his office until he shall resign or be removed or is otherwise disqualified to serve, or until his successor is chosen and qualified. Section 4.3 Other Officers The Board, at its discretion, may appoint, or empower the Chairman of the Board to appoint, a Chief Operating Officer, one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, or such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as set forth in the Bylaws or as the Board or the President may from time to time determine. Section 4.4 Removal Any officer may be removed, either with or without cause, by the Board, at any regular or special meeting thereof, or, except in case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board (subject, in each case, to the rights, if any, of an officer under contract of employment). Section 4.5 Resignation Any officer may resign at any time by giving written notice to the Board or to the President, or to the Secretary of the Corporation without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.6 Vacancies A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office. Section 4.7 Chairman of the Board The Board may choose a Chairman of the Board from among its members. The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board and at all meetings of the Stockholders and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 4.8 below. The Chairman of the Board shall hold office until the organizational meeting of the Board next succeeding his election and until his successor is elected and qualified or until his earlier resignation or removal. Section 4.8 President Subject to such supervisory powers, if any, as may be given by the Board to the Chairman of the Board, if there be such an officer, the President shall be general manager and Chief Executive Officer of the Corporation and shall, subject to the control of the Board, have general supervision, direction and control of the business and affairs of the Corporation. In the absence of the Chairman of the Board, or if there be none, he shall preside at all meetings of the Board and at all meetings of Stockholders. He shall have the general powers and duties of management usually vested in the office of President of a Corporation, and shall have such other powers and duties as may be prescribed by the Board or these Bylaws. Section 4.9 Secretary The Secretary shall keep or cause to be kept, at the principal executive office or such other place as the Board may order, a book of minutes of all meetings of Stockholders, the Board and committees of the Board, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at the directors' or committee meetings, the number of shares present or represented at Stockholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent or registrar, record of its Stockholders giving the names and addresses of all Stockholders and the number and class of shares held by each, the number and date of certificates issued for shares, and the number and date of cancellation of every certificate surrendered for cancellation. This information may be kept in written form or in any other form capable of being converted into written form. The Secretary shall give, or cause to be given, notice of all the meetings of the Stockholders and of the Board required by the Bylaws or by law to be given, and shall have such other powers and perform such other duties as may be prescribed by the Board or by the Bylaws. Section 4.10 Chief Financial Officer The Chief Financial Officer, who shall report on a day to day basis to the President or Chief Executive Officer, shall be subject to the control and general supervision of the Supervisory Committee of the Board, subject in all cases to the ultimate supervision of the Board. The Chief Financial Officer shall have general supervision, direction and control of the financial affairs of the Corporation and shall have such other powers and duties as may be prescribed by the Supervisory Committee or these Bylaws. In the absence of a named Treasurer, the Chief Financial Officer shall also have the powers and duties of the Treasurer as hereinafter set forth and shall be authorized and empowered to sign as Treasurer in any case where such officer's signature is required. Section 4.11 Treasurer The Treasurer shall keep or cause to be kept the books and records of account as provided for and in accordance with Section 6.1 of these Bylaws. The books of account shall at all reasonable times be open to inspection by any director. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board. The Treasurer, who shall report on a day to day basis to the Chief Financial Officer or, if there is no Chief Financial Officer, to the President or Chief Executive Officer, shall be subject to the control and general supervision of the Supervisory Committee of the Board (subject in all cases to the ultimate supervision of the Board), and shall disburse the funds of the Corporation as may be ordered by the Supervisory Committee, shall render to the Chief Executive Officer and directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Supervisory Committee or these Bylaws. Section 4.12 Vice President In the absence or disability of the President, the Vice Presidents, in order of their rank as fixed by the Board, or, if not ranked, the Vice President designated by the Board, shall perform all the duties of the President and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. Each Vice President shall have such other powers and perform such other duties as from time to time may be prescribed for them. Section 4.13 Chief Operating Officer The Chief Operating Officer, who shall report on a day to day basis to the President or Chief Executive Officer, shall have such authority and perform such duties as the Supervisory Committee may from time to time determine (subject in all cases to the ultimate supervision of the Board). Article 5 Indemnification and Insurance Section 5.1 Definitions For purposes of this Article 5 the following definitions shall apply: "Agent" means any person who: (i) is or was a director, officer, employee, or other agent of this Corporation; or (ii) is or was serving at the request of this Corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise ("enterprise"); or (iii) was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of this Corporation or of another enterprise at the request of such predecessor corporation. "Predecessor Corporation" shall include, any constituent corporations (including any constituent of a constituent) absorbed in consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its agents, so that any person who is or was an agent of such constituent corporation, or is or was serving at the request of such constituent corporation as agent of another enterprise, shall stand in the same position under and subject to the provisions of this Article 5 (including, without limitation, the provisions of Section 5.5) with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. "Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative and whether internal or external to the Corporation. "Expenses" includes, without limitation, attorneys' fees and any expenses of establishing a right to indemnification under this Article 5. "Losses" means the total amount which the agent becomes legally obligated to pay in connection with any proceeding including judgments, fines, amounts paid in settlement and expenses. For purposes of this Article 5, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to "serving at the request of this Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves service by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article 5. Section 5.2 Third Party Actions The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, any proceeding (other than an action by or in the right of the Corporation) by reason of the fact that he is or was an agent of the Corporation against losses paid in settlement actually and reasonably incurred by him in connection with such proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, had reasonable cause to believe that his conduct was unlawful. Section 5.3 Actions by or in the Right of the Corporation The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, any proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was an agent of the Corporation against expenses actually and reasonably incurred by him in connection with the defense or settlement of such proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 5.4 Successful Defense To the extent that an agent of the Corporation has been successful on the merits or otherwise in defense of any proceeding referred to in Sections 5.2 and 5.3, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith. Section 5.5 Determination of Conduct Any indemnification under Sections 5.2 or 5.3 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 5.2 and 5.3. Such determination shall be made (1) by the Board of Directors or the Supervisory Committee by a majority vote of a quorum consisting of directors who were not parties to such proceeding or (2) if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the Stockholders. Section 5.6 Payment of Expenses in Advance Expenses incurred by an agent in connection with a proceeding shall be paid by the Corporation in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article 5. Section 5.7 Indemnity Not Exclusive The indemnification and advancement of expenses provided by, or granted pursuant to, the other provisions of this Article 5, shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 5.8 Insurance Indemnification The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an agent of the Corporation against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article 5 or of Section 145 of the Delaware General Corporation Law. Section 5.9 Heirs, Executors and Administrators The indemnification and advancement of expenses provided by, or granted pursuant to, this Article 5 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be an agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Article 6 Miscellaneous Section 6.1 Books of Accounts and Proceedings The Corporation shall keep adequate and correct books and records of account and shall keep minutes of the proceedings of its Stockholders, Board and committees of the Board and shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its Stockholders, giving the names and addresses of all Stockholders and the number and class of shares held by each. Such minutes shall be kept in written form. Such other books and records shall be kept either in written form or in any other form capable of being converted to written form. Section 6.2 Rights of Inspection A. By Stockholders 1. Record of Stockholders The Secretary shall prepare and make, at least ten (10) days before every meeting of Stockholders, a complete list of Stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list shall be open to the examination of any Stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, at such place as specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. Further, any Stockholder, in person or by attorney or other agent, upon written demand under oath stating the purposes thereof, has the right, during usual business hours, to inspect for any proper purpose the Corporation's list of Stockholders. Such Stockholder has the right to make copies or extracts therefrom. A proper purpose for Section 6.2.A shall mean a purpose reasonably related to such person's interest as a Stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the Stockholder. The demand under oath shall be directed to the Corporation at its principal place of business. The Corporation shall either permit the right to inspection or reply to the written demand within five (5) business days of receiving the demand. 2. Corporate Records Any Stockholder or holder of a voting trust, in person or by attorney or other agent, shall upon written demand under oath stating the purpose thereof, have the right during usual business hours, to inspect for any proper purpose the Corporation's stock ledger, a list of its Stockholders and its other books and records pursuant to the provisions of Section 220 of the Delaware General Corporation Law. This right of inspection shall also extend to the records of any subsidiary of the Corporation. B. By Directors Every director shall have the right at any reasonable time to examine the Corporation's stock ledger, a list of its Stockholders and its other books and records for a purpose reasonably related to his position as a director. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. Section 6.3 Checks, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Section 6.4 Authority to Execute Contracts The Board may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and subject to the applicable laws of the State of Delaware. Such authority may be general or confined to specific instances and, unless so authorized by the Board, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount. Section 6.5 Representation of Shares of Other Corporations The Chairman of the Board, if any, President or any Vice President and the Secretary or any Assistant Secretary of this Corporation are authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers. Section 6.6 Construction and Definitions Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the corporation laws of the State of Delaware shall govern the construction of these Bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular number includes the plural and the plural number includes the singular, and the term "person" includes a corporation as well as a natural person. Section 6.7 Reimbursement of Disallowed Compensation Any payments made to an officer or director of the Corporation including, but not limited to, payments of compensation, interest, rent or reimbursement for expenses, which payments are disallowed to the Corporation in whole or in part by the Internal Revenue Service as a deductible business expense, shall, at the option of the Corporation, be reimbursed by such officer or director to the Corporation to the full extent of the amount so disallowed. Any officer or director of the Corporation who shall have received payment of any such amounts so disallowed shall promptly, on demand, reimburse the Corporation for same. The Corporation may withhold the amount of any such disallowance with respect to payments to any given officer or director from the future compensation or other payments which may be due or become due to such officer or director, if he does not reimburse the Corporation on demand. Article 7 Amendments Section 7.1 Power of Stockholders New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote of Stockholders entitled to exercise a majority of the voting power of the Corporation or by the written consent of such Stockholders, except as otherwise provided by law or by the Certificate of Incorporation. Section 7.2 Power of Directors Subject to the right of Stockholders as provided in Section 7.1 to adopt, amend or repeal Bylaws, any Bylaw may be adopted, amended or repealed by the Board. Article 8 Emergency Provisions Section 8.1 General The provisions of this Article shall be operative only during any emergency resulting from an attack on the United States or on a locality in which the Corporation conducts its business or customarily holds meetings of the Board or Stockholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe or other similar emergency condition, as a result of which a quorum of the Board or a standing committee thereof cannot be convened. Said provisions in such event shall override all other Bylaws of the Corporation in conflict with any provisions of this Article, and shall remain operative so long as it remains impossible or impracticable to continue the business of the Corporation otherwise, but thereafter shall be inoperative; provided that all actions taken in good faith pursuant to such provisions shall thereafter remain in full force and effect unless and until revoked by action taken pursuant to the provisions of the Bylaws other than those contained in this Article. No officer, director or employee acting in accordance with any provision of this Article shall be liable except for willful misconduct. Section 8.2 Unavailable Directors All directors of the Corporation who are not available to perform their duties as directors by reason of physical or mental incapacity or for any other reason or who are unwilling to perform their duties or whose whereabouts are unknown shall automatically cease to be directors, with like effect as if such persons had resigned as directors, so long as such unavailability continues. Section 8.3 Authorized Number of Directors The authorized number of directors shall be the number of directors remaining after eliminating those who have ceased to be directors pursuant to Section 8.2, or the minimum number required by law, whichever number is greater. Section 8.4 Quorum The number of directors necessary to constitute a quorum shall be one-third (1/3rd) of the authorized number of directors as specified in the foregoing Section, or such other minimum number as, pursuant to the law or lawful decree then in force, it is possible for the bylaws of a corporation to specify. Section 8.5 Creation of Emergency Committee In the event the number of directors remaining after eliminating those who have ceased to be directors pursuant to Section 8.2 is less than the minimum number of authorized directors required by law, then until the appointment of additional directors to make up such required minimum, all the powers and authorities which the Board could by law delegate, including all powers and authorities which the Board could delegate to a committee, shall be automatically vested in an emergency committee, and the emergency committee shall thereafter manage the affairs of the Corporation pursuant to such powers and authorities and shall have all other powers and authorities as may by law or lawful decree be conferred on any person or body of persons during a period of emergency. Section 8.6 Constitution of Emergency Committee The emergency committee shall consist of all the directors remaining after eliminating those who have ceased to be directors pursuant to Section 8.2, provided that such remaining directors are not less than three (3) in number. In the event such remaining directors are less than three (3) in number, the emergency committee shall consist of three (3) persons, who shall be the remaining director or directors and either one (1) or two (2) officers or employees of the Corporation, as the remaining director or directors may in writing designate. If there is no remaining director, the emergency committee shall consist of the three (3) most senior officers of the Corporation who are available to serve, and if and to the extent that officers are not available, the most senior employees of the Corporation. Seniority shall be determined in accordance with any designation of seniority in the minutes of the proceedings of the Board, and in the absence of such designation, shall be determined by rate of remuneration. In the event that there are no remaining directors and no officers or employees of the Corporation available, the emergency committee shall consist of three (3) persons designated in writing by the Stockholder owning the largest number of shares of record as of the date of the last record date. Section 8.7 Powers of Emergency Committee The emergency committee, once appointed, shall govern its own procedures and shall have power to increase the number of members thereof beyond the original number, and in the event of a vacancy or vacancies therein, arising at any time, the remaining member or members of the emergency committee shall have the power to fill such vacancy or vacancies. In the event at any time after its appointment all members of the emergency committee shall die or resign or become unavailable to act for any reason whatsoever, a new emergency committee shall be appointed in accordance with the foregoing provisions of this Article. Section 8.8 Directors Becoming Available Any person who has ceased to be a director pursuant to the provisions of Section 8.2 and who thereafter becomes available to serve as a director shall automatically become a member of the emergency committee. Section 8.9 Election of Board The emergency committee shall, as soon after its appointment as is practicable, take all requisite action to secure the election of a Board, and upon such election all the powers and authorities of the emergency committee shall cease. Section 8.10 Termination of Emergency Committee In the event, after the appointment of an emergency committee, a sufficient number of persons who ceased to be directors pursuant to Section 8.2 become available to serve as directors, so that if they had not ceased to be directors as aforesaid, there would be enough directors to constitute the minimum number of directors required by law, then all such persons shall automatically be deemed to be reappointed as directors and the powers and authorities of the emergency committee shall be at an end. The undersigned, being the Secretary of Carolco Entertainment Inc., hereby certifies that the foregoing Bylaws were adopted as the Bylaws of said Corporation by its Board of Directors on [________], 1994. __________________________________________ [_____], Secretary EX-3.1 6 EXHIBIT TO EX-2.1 EXHIBIT 3.1 Amended and Restated Certificate of Incorporation of LIVE Entertainment Inc., a Delaware corporation (Pursuant to Sections 242 and 245 of the Delaware General Corporation Law) LIVE Entertainment Inc., a corporation organized and existing under the Delaware General Corporation Law, DOES HEREBY CERTIFY: That this Amended and Restated Certificate of Incorporation has been approved by its Board of Directors and adopted by the Corporation's stockholders pursuant to Sections 242 and 245 of the Delaware General Corporation Law. That its Certificate of Incorporation as filed with the office of the Delaware Secretary of State on March 15, 1988, and restated by its Restated Certificates of Incorporation filed on September 20, 1988 and November 2, 1988, is hereby further amended and restated in its entirety as follows: FIRST: The name of the corporation (hereinafter called the "Corporation") is Carolco Entertainment Inc. SECOND: The address, including street, number, city and county, of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of this Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of shares of capital stock of the Corporation (referred to herein as "Shares") which the Corporation shall have authority to issue is 215,000,000 Shares, of which 200,000,000 will be common stock having a par value of $0.01 (the "Common Stock") and 15,000,000 will be series preferred stock having a par value of $1.00 (the "Series Preferred Stock"), of which 15,000 shall be designated as Series C Preferred Stock ("Series C Preferred Stock") and 120,000 shall be designated as Series D Preferred Stock ("Series D Preferred Stock"), each of which such Series of Preferred Stock shall have the preferences and relative, participating, optional and special rights and qualifications, limitations and restrictions set forth below. The remaining Series Preferred Stock may be issued, from time to time, in one or more series as authorized by the Board of Directors. Prior to issuance of a series, the Board of Directors by resolution shall designate it from other series and classes of stock of the Corporation, shall specify the number of shares to be included in the series, and shall fix the terms, rights, restrictions and qualifications of the shares of a series, including any preferences, voting powers, dividend rights and redemption, sinking fund and conversion rights. Subject to the express terms of the Series Preferred Stock outstanding at the time, the Board of Directors may increase or decrease the number of shares or alter the designation or classify or reclassify any unissued shares of a particular series of Series Preferred Stock by fixing or altering in any one or more respects from time to time before issuing the shares, any terms, rights, restrictions and qualifications of the shares. A. Series C Preferred Stock 1. Series C Dividend Rights 1.1 A. The holder of each share of Series C Preferred Stock (a "Series C Share") registered as such in the stock records of the Corporation (a "Series C Holder") as of the Series C Record Date (as defined below) shall be entitled to receive, when, as and if declared by the Corporation's Board of Directors or a duly authorized committee thereof out of the funds of the Corporation legally available therefor, on January 1, April 1, July 1 and October 1 of each year (a "Series C Dividend Payment Date") cumulative dividends per Series C Share (the "Series C Cash Dividends") in cash at the Series C Cash Rate (as hereinafter defined) based upon the Series C Liquidation Preference (as defined in Paragraph A.2 and as adjusted pursuant to Paragraph A.1.1.D below) of such Series C Share. To the extent permitted by applicable law and not prohibited pursuant to the terms of applicable credit instruments or senior securities, the Board of Directors shall declare Series C Cash Dividends at the Series C Cash Rate for payment on each Series C Dividend Payment Date (or, if such day is not a business day, on the next business day thereafter). B. A "Series C Quarterly Payment Period" shall mean each of the three month periods ending on December 31, March 31, June 30 and September 30 of each year. C. The "Series C Cash Rate" shall mean the quarterly rate of one and one quarter percent (1 1/4%). D. Series C Dividends shall accrue (whether or not paid) during each Series C Quarterly Payment Period from the Series C Dividend Payment Date immediately preceding such Series C Quarterly Payment Period to the last day of such Series C Quarterly Payment Period, provided that, for the first Series C Quarterly Payment Period, Series C Cash Dividends shall accrue commencing as of the date of Initial Issuance (as defined below) of the Series C Shares. Series C Cash Dividends shall be calculated on the basis of a 90 day Series C Quarterly Payment Period and the actual number of days elapsed. For any Series C Quarterly Payment Period with respect to which the Series C Cash Dividend is not fully paid in cash on the Series C Dividend Payment Date at the end of such Series C Quarterly Payment Period, such accrued but unpaid Series C Cash Dividends shall be added to the Series C Liquidation Preference of the Series C Shares effective at the beginning of the Series C Quarterly Payment Period next succeeding the Series C Quarterly Payment Period as to which such Series C Cash Dividends were not paid, and shall thereafter accrue additional Series C Cash Dividends at the Series C Cash Rate. Any Series C Cash Dividend payment made on Series C Shares shall first be credited against the earliest accrued but unpaid Series C Cash Dividend which has been added to the Series C Liquidation Preference of the Series C Shares pursuant to this Paragraph A.1.1.D and shall thereafter reduce the Series C Liquidation Preference. With respect to the Series C Shares, the date of "Initial Issuance" shall mean the Effective Date (as defined in that certain Agreement and Plan of Merger dated as of August 10, 1994 by and among the Corporation, Carolco Acquisition Corp. and Carolco Pictures Inc.) of said merger. E. Series C Cash Dividends, if and when declared on each Series C Share, shall to the extent permitted by applicable law be declared at least twenty (20) business days prior to the next Series C Dividend Payment Date for payment on the next Series C Dividend Payment Date to the Series C Holders of record on the date determined in such declaration, which date shall in no event be more than fifteen (15) business days after the date of declaration (the "Series C Record Date"). Series C Cash Dividends shall be payable on each Series C Dividend Payment Date (or if any such day is not a business day, the next succeeding business day), except that Series C Cash Dividends for the period during which a Series C Redemption (as defined in Paragraph A.5.1) shall occur shall be payable on Series C Shares redeemed in accordance with Paragraph A.5.2 (unless otherwise paid on a Series C Dividend Payment Date for a Series C Record Date occurring prior to a Series C Redemption Date (as defined in Paragraph A.5.2)). The Series C Holder of any Series C Shares which are the subject of a conversion pursuant to Paragraph A.4 shall, on the Series C Conversion Date (as defined in Paragraph A.4.F), cease to have any rights with respect to any accrued Series C Cash Dividends on such Series C Shares which have not been declared and paid on or before such Series C Conversion Date except to the extent such accrued but unpaid Series C Cash Dividends have been added to the Series C Liquidation Preference of such Shares and except that in the event a conversion of Series C Shares is effected after a Series C Redemption Notice (as defined in Paragraph A.5.2) is delivered by the Corporation but prior to a Series C Redemption Date, then, to the extent lawful, the Corporation shall pay to such Series C Holder an amount in cash equal to all accrued and unpaid Series C Cash Dividends from the last Series C Dividend Payment Date until the date the converting Series C Holder delivered its notice of conversion pursuant to Paragraph A.4.F. 1.2 Until the date no Series C Shares are outstanding (the "Series C Termination Date"), the Corporation shall not declare, pay or set aside for payment any dividend (other than in shares of Junior Stock (as hereinafter defined)) or other distribution in respect of its Junior Stock, or call for redemption, redeem, purchase or otherwise acquire for any consideration (other than shares of its Junior Stock) any shares of its Junior Stock, any warrants, rights, calls or options exercisable for any shares of Junior Stock unless all dividends accumulated and unpaid with respect to the Series C Shares are simultaneously declared and paid. With respect to the Series C Preferred Stock, "Junior Stock" means Common Stock (as hereinafter defined), Series D Preferred Stock or any other series of preferred stock of the Corporation which ranks junior to or on a parity with (as determined pursuant to Paragraph A.6) the Series C Preferred Stock. "Common Stock" means the common stock, par value $.01 per share, of the Corporation, and any share of successor or replacement stock. 1.3 Each Series C Holder shall be entitled to participate with the holders of Common Stock equally and ratably (on the basis of the number of shares of Common Stock such Series C Holder would then own if it then converted its Series C Shares pursuant to Paragraph A.4) in any subscription rights or other similar rights to acquire securities or property of the Corporation granted to any holder of Common Stock; provided that any subscription rights or other similar rights acquired by Series C Holders shall be excluded for purposes of calculating any adjustments pursuant to Paragraph A.4.D hereof. 2. Rights on Liquidation and Ranking 2.1 In the event of the liquidation, dissolution, winding up or sale or other disposition of all or substantially all of the assets of the Corporation, whether voluntary or involuntary ("Liquidation"), the Series C Holder shall be entitled to receive with respect to its Series C Shares, after the satisfaction of all distributions to holders of other series of preferred stock, if any, which are required (at the direction of the holder thereof or otherwise) to be redeemed prior to or in connection with the consummation of such Liquidation or which are expressly senior in liquidation preference to the Series C Shares including any series of preferred stock which is mandatorily redeemable (collectively, the "Series C Senior Payments") but before any distribution is made to or set aside for the holders of Common Stock or any other series of preferred stock of the Corporation, if any, which are not then required to be redeemed or which are junior in liquidation preference to the Series C Shares, cash or any other assets of the Corporation in an amount (or having a fair market value) equal to $1,000 ("Series C Liquidation Preference") plus all accrued but unpaid Series C Cash Dividends which have been added to the Series C Liquidation Preference of such shares pursuant to Paragraph A.1.1.D up to the date of the final distribution in Liquidation. If after the satisfaction of all Series C Senior Payments the assets of the Corporation available for distribution to Series C Holders shall be insufficient to permit the payment in full of the amount due the Series C Holders pursuant to this Paragraph A.2, the entire assets of the Corporation available for distribution to Series C Holders after the satisfaction of all Series C Senior Payments shall be distributed pari passu among the Series C Holders and the holders of other series of preferred stock which are not junior in liquidation preferences to the Series C Shares, if any, in accordance with their respective liquidation preferences. The fair market value of any assets of the Corporation and the proportion of cash and other assets distributed by the Corporation to the Series C Holders shall be reasonably determined in good faith by the Board of Directors. A merger or consolidation of the Corporation with another corporation or a voluntary sale of all or substantially all of the assets of the Corporation principally in exchange for stock and/or securities of another corporation (all referred to as a "Merger") shall not be deemed a Liquidation if such Merger does not occur as part of a proceeding under Title 11 of the United States Code or any federal or state law for the protection of creditors or relief of debtors. 2.2 With regard to rights to receive distributions upon Series C Liquidation of the Corporation and dividends, the Series C Shares shall rank (i) senior to the Series D Preferred Stock and (ii) senior to the Common Stock and any other equity securities of the Corporation that by their terms are not made senior to or on a parity with the Series C Shares as to such rights. 3. Voting Rights 3.1 Except as otherwise provided by law and except as provided in Paragraphs A.3.2 and A.3.3 below, each Series C Holder shall have the same voting rights as a holder of the number of shares of Common Stock which such Series C Holder would then own if it then converted its Series C Shares pursuant to Paragraph A.4. 3.2 So long as any of the Series C Shares are outstanding, the Corporation will not, without the affirmative vote or consent of the Series C Holders representing at least a majority (unless the consent or vote of Series C Holders of greater than a majority is then required by law) of the Series C Shares at the time outstanding, given in person or by proxy, either in writing or by a resolution adopted at a meeting called for the purpose, the Series C Holders voting or consenting separately as a class: A. amend, alter or repeal any of the provisions of the Corporation's Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws or the resolution providing for the issue of the Series C Shares or pass any stockholder resolution, including such action effected by merger or similar transaction in which the Corporation is the surviving corporation, if such amendment or resolution would affect adversely the preferences, special rights or powers of the Series C Shares except if such action is permitted under the other provisions of this Paragraph A.3.2; B. increase or decrease (other than by redemption or conversion) the total number of authorized Series C Shares; C. issue any capital stock which ranks senior or on a parity with the Series C Shares with respect to rights to receive distributions upon liquidation, dissolution or winding up of the Corporation or with respect to dividends; D. enter into a Merger in which the Corporation is not the surviving corporation; provided, however, that the provisions of this subparagraph D shall not be applicable to any such Merger if the authorized capital stock of the surviving corporation immediately after such Merger shall include only classes or series of stock for which no such consent or vote would have been required pursuant to Paragraph A.3.2 if such class or series had been authorized by the Corporation immediately prior to such Merger or which have the same rights, preferences and limitations and authorized amount as a class or series of stock of the Corporation authorized (with such consent or vote of the Series C Shares) prior to such Merger and continuing as an authorized class or series at the time thereof. A Merger of the Corporation, or similar Merger in which the holders of its capital stock receive all cash shall not be deemed to adversely affect the preferences, special rights or powers of the Series C Shares. Nor shall the authorization or issuance of the Series D Preferred Stock, nor the authorization or issuance of any other series of preferred stock if such other series ranks junior to the Series C Shares with respect to rights to receive distributions upon Liquidation of the Corporation or with respect to dividends be deemed to adversely affect the preferences, special rights or powers of the Series C Shares. 3.3 In the event of an issuance by means of a stock split, reverse split or stock dividend or other similar event or reclassification of shares of Common Stock outstanding, the voting rights of the Series C Shares shall be fairly and equitably (in the judgment of the Board of Directors of the Corporation) adjusted at the same time and in the same manner as the adjustment is made in the rights of the Common Stock in order to maintain the same voting rights as the Series C Shares on the date of issuance. 3.4 Copies of all notices sent to the holders of Common Stock shall be simultaneously sent to each Series C Holder. 4. Series C Conversion Rights Common Stock A. Number of Series C Shares. Each Series C Share shall be convertible, at the option of the Series C Holder thereof, at any time and from time to time, into that number of shares of Common Stock obtained by dividing the Series C Liquidation Preference (including any Series C Cash Dividends added to the Series C Liquidation Preference pursuant to Paragraph A.1.1.D) of such Series C Share by the "Series C Conversion Price" determined in accordance with Paragraph A.4.B. B. Series C Conversion Price. The Series C Conversion Price shall be $3.045 and shall be adjusted from time to time pursuant to Paragraph A.4.D. The Corporation may (but shall have no obligation to) from time to time temporarily or permanently reduce the Series C Conversion Price as it deems appropriate. C. Series C Conversion and Series C Redemption. In case any Series C Share is called for redemption, the right to convert such Series C Share shall terminate at the close of business on the Series C Redemption Date; provided that no default by the Corporation in the payment of the applicable Series C Redemption Price (as defined in Paragraph A.5.1) shall have occurred and be continuing. D. Adjustment of Series C Conversion Price and Ratio for Series C Conversion. Except as otherwise provided herein, the Series C Conversion Price shall be subject to adjustment from time to time only as follows: (a) In case the Corporation shall (1) take a record of the holders of Common Stock for the purpose of entitling them to receive a dividend payable in shares of Common Stock, (2) subdivide (by stock split, merger, consolidation or otherwise) the outstanding shares of Common Stock into a greater number of shares, (3) combine (by reverse stock split, merger, consolidation or otherwise) the outstanding shares of Common Stock into a smaller number of shares or (4) increase or decrease the number of shares of outstanding Common Stock by reclassification of its Common Stock or issue any shares of any other class or series of the Corporation by reclassification of its Common Stock, the Series C Conversion Price (then in effect) shall be adjusted so that each Series C Holder shall thereafter be entitled upon the conversion of each Series C Share held by him to receive for such Series C Share the number of shares of Common Stock which it would have owned and/or have been entitled to receive upon the occurrence of an event or record date described above had the Series C Share been converted immediately prior to the happening of the event, the adjustment to the Series C Conversion Price to become effective immediately after (x) the record date (in the case of a dividend) or (y) the day upon which such subdivision or combination shall become effective. (b) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock property including securities, but excluding: (x) any dividend or distribution paid in Common Stock; (y) any dividend or distribution paid in cash out of the surplus of the Corporation (provided that such distribution shall not reduce stockholders' equity below the sum of the aggregate Series C Liquidation Preference of the Series C Shares then outstanding and the aggregate liquidation preference of all other shares ranking senior or pari passu to the Series C Shares) or (z) any securities issued or redeemed pursuant to a shareholders rights plan, the Series C Conversion Price shall be adjusted by multiplying (a) the Series C Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive the distribution by (b) a fraction, the numerator of which is the excess of the Market Price (as defined in Paragraph A.4.J) for that date over the fair market value on that date (as reasonably determined in good faith by the Board of Directors, whose determination shall be conclusive) of the property so distributed per share of Common Stock, and the denominator of which is the Market Price for that date. The adjustment shall become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive the distribution. (c) In case the Corporation shall sell or issue shares of Common Stock or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock, excluding shares of Common Stock issued or reserved for issuance by the Corporation in the following situations: (i) in any transaction described in clause (a) or (b) above; (ii) (x) pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation, and the investment of additional optional amounts with respect to such plan, (y) pursuant to any employee benefit plan or program of the Corporation or (z) to officers, directors or employees pursuant to an employee stock option plan approved by the holders of the Common Stock, in any such case, either (A) at a price per share not less than 95% of the Market Price per share of Common Stock, or (B) in an amount of shares of Common Stock not greater than 5% of the total number of shares of Common Stock outstanding on a fully diluted basis; and (iii) upon conversion of the Series C Shares or Series D Shares, or upon conversion, exercise or exchange of rights, options, warrants or convertible or exchangeable securities outstanding or as to which a binding commitment existed as of the date of Initial Issuance of the Series C Shares. and the price per share (determined in the case of rights, options, warrants or convertible or exchangeable securities as the quotient of (x) the aggregate consideration received or receivable by the Corporation upon the sale and issuance of such rights, options, warrants or convertible or exchangeable securities plus the total consideration payable to the Corporation upon such exercise or conversion divided by (y) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities) is lower than the Market Price on the date of such initial sale and issuance, then the Series C Conversion Price in effect immediately prior to such issuance shall upon such issuance be reduced to the price determined by multiplying such Series C Conversion Price by a fraction, the numerator of which shall be an amount equal to the sum of (A) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance multiplied by the Market Price in effect immediately prior to such issuance plus (B) the consideration, if any, received by the Corporation upon such issuance, and the denominator of which shall be the product of (A) the Market Price in effect immediately prior to such issuance and (B) the total number of shares of Common Stock outstanding on a fully diluted basis, immediately after such issuance. (d) In case the Corporation shall distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding Series C Cash Dividends or distributions made out of current or retained earnings) or rights or warrants to subscribe other than as referred to in subparagraph (c) above, then in each such case the number of shares of Common Stock into which each Series C Share shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such Series C Shares was theretofore convertible by a fraction, of which the numerator shall be the current Market Price per share of Common Stock on the date of such distribution, and of which the denominator shall be the current Market Price per share of Common Stock, less the then fair market value (as reasonably determined by the Board of Directors of the Corporation) of the assets, evidences of indebtedness, subscription rights or warrants so distributed (the "Distributed Property") over the aggregate consideration receivable by the Corporation, if any, for the Distributed Property, as applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made (unless an adjustment is made pursuant to subparagraph (a), (b) or (c) above, in which case such subparagraphs shall apply), but shall also be effective retroactively as to Series C Shares converted after the record date for the determination of stockholders entitled to receive such distribution and before the date such distribution is made. (e) No adjustment in the Series C Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided that any adjustments which by reason of this clause (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be. E. Series C Conversion Upon Reorganization. In case the Corporation shall effect a reorganization, reclassification of its Common Stock (other than a subdivision or combination described in clause (a) of Paragraph A.4.D) or Merger, and pursuant to any such reorganization, reclassification or Merger, any assets or securities of the Corporation, any successor or transferee corporation or any affiliate thereof or cash is received by or distributed to the holders of Common Stock, then each Series C Holder shall have the right thereafter to convert each Series C Share held by such Series C Holder into the kind and amount of shares or assets, securities or cash receivable as a result of consummation of such transaction by a holder of the number of shares of Common Stock into which such Series C Share might have been converted immediately prior to such transaction and shall have no other conversion rights nor shall there be any adjustment to the Series C Conversion Price; in any such event, effective provision shall be made in the certificate of incorporation of the successor or transferee corporation or otherwise, so that the provisions set forth herein for the protection of the conversion rights of the Series C Shares shall thereafter be applicable, as nearly as reasonably may be, to any such other securities, cash and assets deliverable upon conversion of the Series C Shares or other convertible stock or securities received by the Series C Holders in place thereof, and any such successor or transferee corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such other securities, cash or assets as the Series C Holders, or other convertible stock or securities received by the Series C Holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provision for the protection of the conversion right as above provided. In case securities other than Common Stock, cash or assets shall be issuable, payable or deliverable by the Corporation upon conversion as aforesaid, then all references in this Paragraph A.4.E shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities, cash or assets. This provision shall similarly apply to successive reorganizations, reclassifications or Mergers. F. Series C Conversion Method. Any Series C Holder may, at any time prior to the close of business on the Series C Redemption Date for such Series C Shares, exercise the conversion rights as to such Series C Shares by delivering to the Corporation during regular business hours, at the office of the then transfer agent for the Series C Shares or at such other place as may be designated in writing delivered to all Series C Holders by the Corporation, at least ten (10) business days prior to the requested date for conversion, a notice requesting conversion on a specified date and the certificate for the Series C Shares to be converted, duly endorsed in blank or for transfer to the Corporation (if required by it), or accompanied by separate instruments of transfer satisfactory to the Corporation, in either case sufficient to transfer the Series C Shares being converted free of any adverse claim, and written notice stating the number of Series C Shares represented by such certificate that the Series C Holder elects to convert. The notice shall also state the names and addresses of the persons to whom certificates for shares of Common Stock shall be issued, the denominations of such certificates and reasonable delivery instructions with respect thereto. A notice failing to meet the foregoing requirements shall not be valid or effective for any purpose. (The Corporation may (but shall have no obligation to) from time to time waive the requirement of ten (10) days written notice.) Each conversion shall be deemed to have been effected immediately on the close of business on the date specified in such notice (the "Series C Conversion Date"), and the person in whose name any certificate for shares of Common Stock is issuable upon the conversion shall be deemed to have become the holder of record of the Common Stock at such time. If the stock transfer books of the Corporation are closed on the Series C Conversion Date, the Series C Conversion Date for purposes of determining record ownership shall be the next succeeding day on which the stock transfer books are open (and the conversion shall be deemed to have been effected immediately prior to the close of business on that day), but in all cases the conversion shall be at the Series C Conversion Price in effect on the Series C Conversion Date specified in the notice of conversion. As promptly as practicable after the Series C Conversion Date (but in any event within 10 business days), the Corporation shall issue and deliver to such Series C Holder, at the expense of the Corporation and in accordance with such Series C Holder's delivery instructions, a certificate or certificates for the number of full shares of Common Stock to which such Series C Holder is entitled and a check or cash with respect to any fractional interest in a share of Common Stock as provided in Paragraph A.4.G below. Upon conversion of only a portion of the Series C Shares represented by a certificate surrendered for conversion, the Corporation shall issue and deliver to such Series C Holder, at the expense of the Corporation, a new certificate covering the number of Series C Shares representing the unconverted portion of the certificate so surrendered and which new certificate shall entitle the Series C Holder thereof to the same rights of the Series C Shares represented thereby as if the certificate theretofore covering such unconverted Series C Shares had not been surrendered for conversion. G. Fractional Shares of Common Stock. No fractional shares of Common Stock or scrip shall be issued upon conversion of Series C Shares. If more than one Series C Share shall be surrendered for conversion at any one time by the same Series C Holder, the number of full shares of Common Stock issuable upon conversion of such Series C Shares shall be computed on the basis of the aggregate number of Series C Shares so surrendered. Instead of any fractional shares of Common Stock which otherwise would be issuable upon conversion of any Series C Shares, the Corporation shall pay a cash adjustment in respect of such fractional interest based upon the Series C Conversion Price in effect at the close of business on the last business day prior to the Series C Conversion Date. H. Taxes. All shares of Common Stock issued upon conversion of Series C Shares will be validly issued, fully paid and nonassessable. The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series C Shares pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Series C Shares so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such transfer has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid or that no such tax is payable. I. Unauthorized Series C Shares. All certificates representing Series C Shares surrendered for conversion or Series C Redemption shall be appropriately cancelled on the books of the Corporation and the Series C Shares so converted or redeemed represented by such certificates shall be restored to the status of authorized but unissued Series C Shares. J. Market Price. For purposes hereof, the term "Market Price" on any day shall mean the average of the closing prices (as defined below) per share of Common Stock on the New York Stock Exchange, Inc. ("NYSE") if the Common Stock is listed thereon, or, if not so listed, on the principal national stock exchange on which the Common Stock is then listed, or, if not so listed, on the National Association of Securities Dealers Inc. Automated Quotation System (the "NASDAQ System"), in each case, for the 20 consecutive Trading Days immediately preceding the date of determination. A "Trading Day" is a business day in which the principal market on which the Common Stock is traded is open for trading for at least four hours. As used herein, the "closing price" per share of Common Stock for each day shall be the last reported sales price per share, regular way on such day, or if there are no sales on such day, on the immediately preceding day on which such sales occurred; provided that if at the time of any computation pursuant to this paragraph the Common Stock is not then traded on any trading market, the "Market Price" for the purposes hereof shall be the fair value as reasonably determined in good faith by the Board of Directors of the Corporation. K. Available Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of Series C Shares, such number of shares of Common Stock as shall from time to time be sufficient to effect a conversion of all outstanding Series C Shares under Paragraph A.4.A, as such number may from time to time be adjusted pursuant to Paragraph A.4.D, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding Series C Shares, the Corporation shall promptly take such corporate action as may, in the opinion of its counsel and subject to any necessary approval of its stockholders, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. L. Notice to Series C Holders. In the event (i) the Corporation shall declare a dividend or other distribution on the Common Stock other than regular cash dividends declared in the ordinary course or dividends or other distributions payable in Common Stock, (ii) the Common Stock is subdivided, combined or reclassified, (iii) of a Merger, or (iv) of a Liquidation, or (v) the Corporation offers for subscription pro rata to holders of Common Stock any additional shares of stock of any class or series or other rights, then the Corporation shall mail to each Series C Holder at the Series C Holder's address as it appears in the stock records of the Corporation, promptly and in any event at least 15 days prior to the date described in clause (a) below, a notice stating (a) the date for the determination of holders of Common Stock entitled to receive the distribution, subscription rights or the consideration in the Merger or Liquidation, or (b) the date of determination as to which shares of Common Stock will be affected by a subdivision, combination, reclassification, (c) a brief statement of the facts requiring such notice, and (d) if applicable, that the Series C Conversion Price shall be adjusted in accordance with this Paragraph A.4. Upon any adjustment in the Series C Conversion Price, the Corporation shall mail to each Series C Holder at the Series C Holder's address as it appears in the stock records of the Corporation a notice setting forth the adjusted Series C Conversion Price and the method of calculation thereof, provided that, if such address is outside of the United States, then such notice shall be sent by facsimile transmission (if such Series C Holder shall have provided a facsimile number). M. Conclusive Determination. Whenever the Series C Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the transfer agent for the Common Stock, a certificate of a firm of independent public accountants regularly employed by the Corporation setting forth the adjusted Series C Conversion Price, along with a brief statement of the facts requiring the adjustment and the manner of computing the adjustment, which certificate shall be conclusive evidence of the correctness of the adjustment, absent manifest error. 5. Series C Redemption Rights 5.1 Series C Redemption. The Corporation may, at its option, at any time after three years from the date of Initial Issuance of the Series C Shares, and from time to time thereafter, redeem (a "Series C Redemption") at the price determined herein ("Series C Redemption Price"), from funds legally available therefor, all or any portion of the outstanding Series C Shares (not thereafter converted at any time prior to the Series C Redemption Date in accordance with Paragraph A.4) at the Series C Redemption Price which shall be the Series C Liquidation Preference plus all accrued and unpaid Series C Cash Dividends through the Series C Redemption Date (including any accrued but unpaid Series C Cash Dividends added to Series C Liquidation Preference pursuant to Paragraph A.1.1.D) only if there has occurred a Series C Redemption Event (as defined in Paragraph A.5.3) and only if prior to the giving of the Series C Redemption Notice (as hereinafter defined) all Series C Cash Dividends have been paid through the end of the most recent Series C Quarterly Payment Period (including accrued but unpaid Series C Cash Dividends added to Series C Liquidation Preference pursuant to Paragraph A.1.1.D). 5.2 Notice of Series C Redemption. If the Corporation elects to redeem any or all Series C Shares pursuant to a Series C Redemption, the Corporation shall (a) give written notice of such Series C Redemption ("Series C Redemption Notice") to each Series C Holder of Series C Shares to be redeemed at its address as it appears on the stock records of the Corporation by deposit thereof in first class U.S. mail, postage prepaid, and, in the case of a Series C Holder with an address outside of the United States, a Series C Redemption Notice shall be sent by facsimile transmission (if such Series C Holder shall have provided a facsimile number) and (b) set aside an amount equal to the Series C Redemption Price of all Series C Shares subject to Series C Redemption at that time for the benefit of all Series C Holders of Series C Shares subject to Series C Redemption apart from its other funds, and the Series C Shares then subject to Series C Redemption and not otherwise converted in accordance with Paragraph A.4 shall, on the date which is twenty (20) business days after the deposit of the Series C Redemption Notice in accordance with clause (a) of this sentence (the "Series C Redemption Date"), cease to be outstanding and the rights of the Series C Holders and owners thereof shall be limited to payment of the Series C Redemption Price thereof plus accumulated Series C Dividends through the Series C Redemption Date in accordance with the terms hereof. The Corporation shall mail to each Series C Holder of a Series C Share tendered for Series C Redemption the Series C Redemption Price thereof by check within ten (10) days after the Corporation shall receive at its principal office a certificate representing the applicable Series C Share (or an affidavit of lost certificate and indemnity therefor in a form prescribed by the Board of Directors) duly endorsed in blank for transfer to the Corporation (if required by it), accompanied by instruments of transfer satisfactory to the Corporation and sufficient to transfer the Series C Shares being redeemed free of any adverse claim. Should any Series C Holder not receive payment of any amounts due on Series C Redemption of its Series C Shares at the times prescribed by reason of the Corporation's failure to give a Series C Redemption Notice at the times or in the manner prescribed above or to make payment at the times prescribed above for any reason other than the Series C Holder's failure to tender its Series C Shares (or affidavit and indemnity) and instruments of transfer as provided above, the Corporation shall pay to the applicable Series C Holder on demand (x) interest on the sums not paid when due at an annual rate equal to two percent in excess of the "Prime Rate" that is then in effect or announced by Chemical Bank, New York, New York, or its successor, compounding at the end of each thirty (30) days, until the applicable Series C Holder is paid in full and (y) all costs of collection, including but not limited to attorneys' fees and costs, whether or not suit or other formal proceedings are instituted. The Series C Redemption Price shall (in the discretion of the Board of Directors of the Corporation) be adjusted to take into account any stock split or other similar change in the Series C Shares. 5.3 Series C Redemption Event. A "Series C Redemption Event" shall occur with respect to any Series C Share (a) on the tenth day following any ten (10) consecutive Trading Days on which the Market Price is equal to or greater than 150% of the Series C Conversion Price of such Series C Share or (b) in the event of a merger or consolidation of the Corporation with another corporation (or other business entity) or a voluntary sale of all or substantially all of the assets of the Corporation (a "Redemption Event Merger") in which the consideration to be paid to holders of the Common Stock in the Redemption Event Merger is either payable entirely in cash or is property with a fair market value (as reasonably determined in good faith by the Board of Directors of the Corporation) of not less than 150% of the Series C Conversion Price of such Series C Share on the date fixed for purposes of determining the holders of Common Stock entitled to receive consideration in the Redemption Event Merger. 5.4 Selection of Shares. The Corporation shall select the Series C Shares to be redeemed in any Series C Redemption in which not all Series C Shares are required or permitted to be redeemed so that the Series C Shares of each Series C Holder selected for Series C Redemption shall bear the same proportion to the total Series C Shares owned by that Series C Holder as the proportion of all Series C Shares selected for Series C Redemption bears to the total of all then outstanding Series C Shares, but adjusted as determined by the Board of Directors to avoid the redemption of fractional Series C Shares. Should any Series C Shares allowed to be redeemed under the terms hereof not be redeemed solely by reason of limitations imposed by law, the applicable Series C Shares may be redeemed on the earliest possible date thereafter that the applicable Series C Shares may be redeemed to the maximum extent permitted by law. Except as set forth above, the Board of Directors shall prescribe the manner in which any Series C Redemption shall be effected. Any monies set aside by the Corporation for the holders of Series C Shares subject to Series C Redemption which shall not be claimed at the end of one (1) year after the first service of the applicable Series C Redemption Notice shall be released and repaid to the Corporation but shall be paid to the Series C Holder of the applicable Series C Shares so long as submission of its shares occurs within five (5) years after the first service of the applicable Series C Redemption Notice. 6. Ranking of Stock of the Corporation For purposes hereof, any stock of any class or classes of the Corporation shall be deemed to rank: A. Prior to the Series C Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the Series C Holders; B. On a parity with the Series C Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of the Series C Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the Series C Holders; and C. Junior to the Series C Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or Series D Preferred Stock, or if the Series C Holders shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation, winding up of the Corporation, or upon redemption as the case may be, in preference or priority to the holders of shares of such class or classes. B. Series D Preferred Stock 1. Series D Dividend Rights 1.1 A. The holder of record of each share of Series D Preferred Stock ("Series D Share") of the Corporation (a "Series D Holder") as of the Series D Record Date (as defined below) shall be entitled to receive, when, as and if declared by the Corporation's Board of Directors or a duly authorized committee thereof, on January 1, April 1, July 1 and October 1 of each year (a "Series D Dividend Payment Date"), at the option of the Corporation, either: (a) out of the funds of the Corporation legally available therefor, cumulative dividends per Series D Share (the "Series D Cash Dividends") in cash equal to the "Series D Cash Rate" (as hereinafter defined) multiplied by the Series D Liquidation Preference (as defined in Paragraph B.2 and as adjusted pursuant to Paragraph B.1.1.D below) for each Series D Quarterly Payment Period (as hereinafter defined) that such Series D Share is outstanding; or (b) for any Series D Dividend (as hereinafter defined) accruing prior to October 20, 1998, to the extent legally available therefor, cumulative dividends per Series D Share (the "Series D PIK Dividends") in additional Series D Shares equal to the "Series D PIK Rate" (as hereinafter defined) multiplied by the Series D Liquidation Preference (and as adjusted pursuant to Paragraph B.1.1.D below) for each Series D Quarterly Payment Period that such Series D Share is outstanding. To the extent permitted by applicable law and not prohibited pursuant to the terms of applicable credit instruments, senior securities or the Amended and Restated Certificate of Incorporation, the Board of Directors shall declare either Series D Cash Dividends or Series D PIK Dividends (collectively referred to hereinafter as "Series D Dividends") for payment on each Series D Dividend Payment Date (or, if such day is not a business day, on the next business day thereafter). B. A "Series D Quarterly Payment Period" shall mean the three month period ending on December 31, March 31, June 30 and September 30 of each year. C. The "Series D Cash Rate" and "Series D PIK Rate" both shall mean the quarterly dividend rate of one and one quarter percent (1 1/4%). The Series D Cash Rate and Series D PIK Rate shall collectively be referred to as the "Series D Dividend Rate." D. Series D Dividends shall accrue (whether or not paid) during each Series D Quarterly Payment Period from the Series D Dividend Payment Date immediately preceding such Series D Quarterly Payment Period to the last day of such Series D Quarterly Payment Period, provided that, for the first Series D Quarterly Payment Period, Series D Dividends shall accrue commencing as of the date of Initial Issuance (as defined below) of the Series D Shares. Series D Dividends shall be calculated on the basis of a 90-day Series D Quarterly Payment Period and the actual number of days elapsed. For any Series D Quarterly Payment Period with respect to which the Series D Dividend is not fully paid in cash or in Series D Shares on the Series D Dividend Payment Date at the end of such Series D Quarterly Payment Period, such accrued but unpaid Series D Dividends shall be added to the Series D Liquidation Preference of the Series D Shares effective at the beginning of the Series D Quarterly Payment Period next succeeding the Series D Quarterly Payment Period as to which such Series D Dividends were not paid, and shall thereafter accrue additional Series D Dividends at the Series D Dividend Rate. Any Series D Dividend payment made on Series D Shares shall be credited against the earliest accrued but unpaid Series D Dividend which has been added to the Series D Liquidation Preference of the Series D Shares pursuant to this Paragraph B.1.1.D and shall reduce the Series D Liquidation Preference by the amount of the Series D Dividend paid. With respect to the Series D Shares, the date of "Initial Issuance" shall mean October 20, 1993. 1.2 Series D Dividends, if and when declared on each Series D Share, shall to the extent permitted by applicable law be declared at least twenty (20) business days prior to the next Series D Dividend Payment Date for payment on the next Series D Dividend Payment Date to the Series D Holders of record on the date determined in such declaration, which date shall in no event be more than fifteen (15) business days after the date of declaration (the "Series D Record Date"). Series D Dividends shall be payable on each Series D Dividend Payment Date (or if any such day is not a business day, the next succeeding business day), except that Series D Dividends for the period during which a Series D Redemption (as defined in Paragraph B.5.1) shall occur shall be payable on Series D Shares redeemed in accordance with Paragraph B.5.2 (unless otherwise paid on a Series D Dividend Payment Date for a Series D Record Date occurring prior to a Series D Redemption Date (as defined in Paragraph B.5.2)). The Series D Holder of any Series D Shares which are the subject of a conversion pursuant to Paragraph B.4 shall, on the Series D Conversion Date (as defined in Paragraph B.4.F), cease to have any rights with respect to any accrued Series D Dividends on such Series D Shares which have not been declared and paid on or before such Series D Conversion Date except to the extent such accrued but unpaid Series D Dividends have been added to the Series D Liquidation Preference of such Shares and except that in the event a conversion of Series D Shares is effected after a Series D Redemption Notice (as defined in Paragraph B.5.2) is delivered by the Corporation but prior to a Series D Redemption Date, then, to the extent lawful, the Corporation shall pay to such Series D Holder an amount in cash equal to all accrued and unpaid Series D Dividends from the last Series D Dividend Payment Date until the date the converting Series D Holder delivered its notice of conversion pursuant to Paragraph B.4.F. 1.3 So long as any Series D Shares are outstanding, the Corporation shall not declare, pay or set aside for payment any dividend (other than in shares of Junior Stock (as hereinafter defined)) or other distribution in respect of its Junior Stock, or call for redemption, redeem, purchase or otherwise acquire for any consideration (other than shares of its Junior Stock) any shares of its Junior Stock, any warrants, rights, calls or options exercisable for any shares of Junior Stock unless all dividends accumulated and unpaid with respect to the Series D Shares are simultaneously declared and paid. With respect to the Series D Preferred Stock, "Junior Stock" means Common Stock or any other series of preferred stock of the Corporation which ranks junior to or on a parity with (as determined pursuant to Paragraph B.6) the Series D Preferred Stock. "Common Stock" means the common stock, par value $.01 per share, of the Corporation, and any share of successor or replacement stock. 1.4 Each Series D Holder shall be entitled to participate with the holders of Common Stock equally and ratably (on the basis of the number of shares of Common Stock such Series D Holder would then own if it then converted its Series D Shares pursuant to Paragraph B.4) in any subscription rights or other similar rights to acquire securities or property of the Corporation granted to any holder of Common Stock; provided that any subscription rights or other similar rights acquired by Series D Holders shall be excluded for purposes of calculating any adjustments pursuant to Paragraph B.4.D hereof. 2. Rights on Liquidation and Ranking 2.1 In the event of the liquidation, dissolution, winding up or sale or other disposition of all or substantially all of the assets of the Corporation, whether voluntary or involuntary ("Liquidation"), the Series D Holder shall be entitled to receive with respect to such Series D Share, after the satisfaction of all distributions to holders of other series of preferred stock, if any, which are required (at the direction of the holder thereof or otherwise) to be redeemed prior to or in connection with the consummation of such Liquidation or which are expressly senior in liquidation preference to the Series D Shares including any series of preferred stock which is mandatorily redeemable (collectively, the "Series D Senior Payments") but before any distribution is made to or set aside for the holders of Common Stock or any other series of preferred stock of the Corporation, if any, which are not then required to be redeemed or which are junior in liquidation preference to the Series D Shares, cash or any other assets of the Corporation in an amount (or having a fair market value) equal to $1,000 ("Series D Liquidation Preference") plus all accrued but unpaid Series D Dividends which have been added to the Series D Liquidation Preference of such shares pursuant to Paragraph B.1.1.D up to the date of the final distribution in Liquidation. If, after the satisfaction of all Series D Senior Payments, the assets of the Corporation available for distribution to Series D Holders shall be insufficient to permit the payment in full of the amount due the Series D Holders pursuant to this Paragraph B.2, the entire assets of the Corporation available for distribution to Series D Holders after the satisfaction of all Series D Senior Payments shall be distributed pari passu among the Series D Holders and the holders of other series of preferred stock which are not junior in liquidation preferences to the Series D Shares, if any, in accordance with their respective liquidation preferences. The fair market value of any assets of the Corporation and the proportion of cash and other assets distributed by the Corporation to the Series D Holders shall be reasonably determined in good faith by the Board of Directors. A merger or consolidation of the Corporation with another corporation or a voluntary sale of all or substantially all of the assets of the Corporation principally in exchange for stock and/or securities of another corporation (all referred to as a "Merger") shall not be deemed a Liquidation if such Merger does not occur as part of a proceeding under Title 11 of the United States Code or any federal or state law for the protection of creditors or relief of debtors. 2.2 With regard to rights to receive distributions upon Liquidation of the Corporation and dividends, the Series D Shares shall rank (i) junior to the Series C Preferred Stock, and (ii) senior to the Common Stock and any other equity securities of the Corporation that by their terms are not made senior to or on a parity with the Series D Shares as to such rights. 3. Voting Rights 3.1 Except as otherwise provided by law and except as provided in Paragraphs B.3.2 and B.3.1 below, each Series D Holder shall have the same voting rights as a holder of the number of shares of Common Stock which such Series D Holder would then own if it then converted its Series D Shares pursuant to Paragraph B.4. 3.2 So long as any of the Series D Shares are outstanding, the Corporation will not, without the affirmative vote or consent of the Series D Holders of at least eighty percent (80%) of the Series D Shares at the time outstanding, given in person or by proxy, either in writing or by a resolution adopted at a meeting called for such purpose, with the Series D Holders voting or consenting separately as a class: A. amend, alter or repeal any of the provisions of the Corporation's Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws or the resolution providing for the issue of the Series D Shares or pass any stockholder resolution, including such action effected by merger or similar transaction in which the Corporation is the surviving corporation, if such amendment or resolution would affect adversely the preferences, special rights or powers of the Series D Shares except if such action is otherwise permitted under the other provisions of this Paragraph B.3.2; B. increase or decrease (other than by redemption or conversion) the total number of authorized Series D Shares; C. issue any capital stock (other than Series D PIK Dividends) which ranks senior to or on a parity with the Series D Shares with respect to rights to receive distributions upon liquidation, dissolution, or winding up of the Corporation or with respect to dividends; D. enter into a Merger in which the Corporation is not the surviving corporation; provided however, that the provisions of this subparagraph D shall not be applicable to any such Merger if the authorized capital stock of the surviving corporation immediately after such Merger shall include only classes or series of stock for which no such consent or vote would have been required pursuant to Paragraph B.3.2 if such class or series had been authorized by the Corporation immediately prior to such Merger or which have the same rights, preferences and limitations and authorized amount as a class or series of stock of the Corporation authorized (with such consent or vote of the Series D Shares) prior to such Merger and continuing as an authorized class or series at the time thereof; E. take any action, if submitted to the stockholders, which would result in there being no Series D Preferred Acceptable Chairman of the Board of Directors of the Corporation. "Series D Preferred Acceptable Chairman of the Board" means Mario F. Kassar ("Kassar") at any time he is serving as such and any successor chairman of the Board of Directors of the Corporation who is supported by at least eighty percent (80%) of the Series D Shares then outstanding. The holders of at least 80% of the Series D Shares shall irrebuttably be presumed to support any successor to such person as chairman of the Board of Directors of the Corporation unless persons having the power to vote at least 80% of the Series D Shares then outstanding shall submit a written statement to the Secretary of the Corporation within 10 days after Kassar or a chairman of the Board supported by holders of at least 80% of the Series D Shares shall have ceased to be chairman of the Board of Directors of the Corporation stating that the Board of Directors has failed to elect a chairman of the Board acceptable to such holders. A Merger of the Corporation, or similar Merger in which the holders of its capital stock receive all cash shall not be deemed to adversely affect the preferences, special rights or powers of the Series D Shares. Nor shall the authorization or issuance of any other series of preferred stock if such other series ranks junior to the Series D Shares with respect to rights to receive distributions upon Liquidation of the Corporation or with respect to dividends be deemed to adversely affect the preferences, special rights or powers of the Series D Shares. 3.3 In the event of an issuance by means of a stock split, reverse split or stock dividend or other similar event or reclassification of shares of Common Stock outstanding, the voting rights of the Series D Shares shall be fairly and equitably (in the judgment of the Board of Directors of the Corporation) adjusted at the same time and in the same manner as the adjustment is made in the rights of the Common Stock in order to maintain the same voting rights as the Series D Shares had on the date of issuance. 3.4 Copies of all notices sent to the holders of Common Stock shall be simultaneously sent to each Series D Holder. 4. Series D Conversion Rights Common Stock A. Number of Series D Shares. Each Series D Share shall be convertible, at the option of the Series D Holder thereof, at any time and from time to time into that number of shares of Common Stock, obtained by dividing the Series D Liquidation Preference (including any Series D Dividends added to Series D Liquidation Preference pursuant to Paragraph B.1.1.D) of such Series D Share by the "Series D Conversion Price" determined in accordance with Paragraph B.4.B. B. Series D Conversion Price. The Series D Conversion Price shall be [$.60 x Exchange Ratio] and shall be adjusted from time to time pursuant to Paragraph B.4.D. C. Series D Conversion and Series D Redemption. In case any Series D Share is called for redemption, the right to convert such Series D Share shall terminate at the close of business on the Series D Redemption Date; provided that no default by the Corporation in the payment of the applicable Series D Redemption Price (as defined in Paragraph B.5.1) shall have occurred and be continuing. D. Adjustment of Series D Conversion Price and Ratio for Series D Conversion. Except as otherwise provided herein, the Series D Conversion Price shall be subject to adjustment from time to time only as follows: (a) In case the Corporation shall (1) take a record of the holders of Common Stock for the purpose of entitling them to receive a dividend payable in shares of Common Stock, (2) subdivide (by stock split, merger, consolidation or otherwise) the outstanding shares of Common Stock into a greater number of shares, (3) combine (by reverse stock split, merger, consolidation or otherwise) the outstanding shares of Common Stock into a smaller number of shares or (4) increase or decrease the number of shares of outstanding Common Stock by reclassification of its Common Stock or issue any shares of another class or series of the Corporation by reclassification of its Common Stock, the Series D Conversion Price (then in effect) shall be adjusted so that each Series D Holder shall thereafter be entitled upon the conversion of each Series D Share held by him to receive for such Series D Share the number of shares of Common Stock which it would have owned and/or have been entitled to receive upon the occurrence of an event or record date described above had the Series D Share been converted immediately prior to the happening of the event, the adjustment to the Series D Conversion Price to become effective immediately after (x) the record date (in the case of a dividend) or (y) the day upon which such subdivision or combination shall become effective. (b) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock property including securities, but excluding: (x) any dividend or distribution paid in Common Stock; (y) any dividend or distribution paid in cash out of the surplus of the Corporation (provided that such distribution shall not reduce stockholders' equity below the sum of the aggregate Series D Liquidation Preference of the Series D Shares then outstanding and the aggregate liquidation preference of all other shares ranking senior or pari passu to the Series D Shares), or (z) any securities issued or redeemed pursuant to a shareholders rights plan, the Series D Conversion Price shall be adjusted by multiplying (a) the Series D Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive the distribution by (b) a fraction, the numerator of which is the excess of the Market Price (as defined in Paragraph B.4.J) for that date over the fair market value on that date (as reasonably determined in good faith by the Board of Directors, whose determination shall be conclusive) of the property so distributed per share of Common Stock, and the denominator of which is the Market Price for that date. The adjustment shall become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive the distribution. (c) In case the Corporation shall sell or issue shares of Common Stock or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock, excluding shares of Common Stock issued or reserved for issuance by the Corporation in the following situations: (i) in any transaction described in clause (a) or (b) above; (ii) (x) pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation, and the investment of additional optional amounts with respect to such plan, (y) pursuant to any employee benefit plan or program of the Corporation or (z) to officers, directors or employees pursuant to an employee stock option plan approved by the holders of the Common Stock, in any such case, either (A) at a price per share not less than 95% of the Market Price per share of Common Stock, or (B) in an amount of shares of Common Stock not greater than 5% of the total number of shares of Common Stock outstanding on a fully diluted basis; and (iii) upon conversion of the Series C Shares or Series D Shares or upon conversion, exercise or exchange of rights, options, warrants or convertible or exchangeable securities outstanding or as to which a binding commitment existed as of the Effective Date (as defined in that certain Agreement and Plan of Merger dated as of August 10, 1994 by and among the Corporation, Carolco Acquisition Corp. and Carolco Pictures, Inc.) of said merger. and the price per share (determined in the case of rights, options, warrants or convertible or exchangeable securities as the quotient of (x) the aggregate consideration received or receivable by the Corporation upon the sale and issuance of such rights, options, warrants or convertible or exchangeable securities plus the total consideration payable to the Corporation upon such exercise or conversion divided by (y) the total number of shares of Common Stock covered by such rights, options, warrants or convertible or exchangeable securities) is lower than the Market Price on the date of such initial sale and issuance, then the Series D Conversion Price in effect immediately prior to such issuance shall upon such issuance be reduced to the price determined by multiplying such Series D Conversion Price by a fraction, the numerator of which shall be an amount equal to the sum of (A) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance multiplied by the Market Price in effect immediately prior to such issuance plus (B) the consideration, if any, received by the Corporation upon such issuance, and the denominator of which shall be the product of (A) the Market Price in effect immediately prior to such issuance and (B) the total number of shares of Common Stock outstanding on a fully diluted basis, immediately after such issuance. (d) In case the Corporation shall distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding Series D Dividends or distributions made out of current or retained earnings) or rights or warrants to subscribe other than as referred to in subparagraph (c) above, then in each such case the number of shares of Common Stock into which each Series D Share shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such Series D Shares was theretofore convertible by a fraction, of which the numerator shall be the current Market Price per share of Common Stock on the date of such distribution, and of which the denominator shall be the current Market Price per share of Common Stock, less the excess of the then fair market value (as reasonably determined by the Board of Directors of the Corporation) of the assets, evidences of indebtedness, subscription rights or warrants so distributed (the "Distributed Property") over the aggregate consideration receivable by the Corporation, if any, for the Distributed Property, as applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made (unless an adjustment is made pursuant to subparagraph (a), (b) or (c) above, in which case such subparagraphs shall apply), but shall also be effective retroactively as to Series D Shares converted after the record date for the determination of stockholders entitled to receive such distribution and before the date such distribution is made. (e) No adjustment in the Series D Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% of such price; provided that any adjustments which by reason of this clause (e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest cent or the nearest one-hundredth of a share, as the case may be. E. Series D Conversion Upon Reorganization. In case the Corporation shall effect a reorganization, reclassification of its Common Stock (other than a subdivision or combination described in clause (a) of Paragraph B.4.D) or Merger, and pursuant to any such reorganization, reclassification or Merger, any assets or securities of the Corporation, any successor or transferee corporation or any affiliate thereof or cash is received by or distributed to the holders of Common Stock, then each Series D Holder shall have the right thereafter to convert each Series D Share held by such Series D Holder into the kind and amount of shares or assets, securities or cash receivable as a result of consummation of such transaction by a holder of the number of shares of Common Stock into which such Series D Share might have been converted immediately prior to such transaction and shall have no other conversion rights nor shall there be any adjustment to the Series D Conversion Price; in any such event, effective provision shall be made in the certificate of incorporation of the successor or transferee corporation or otherwise, so that the provisions set forth herein for the protection of the conversion rights of the Series D Shares shall thereafter be applicable, as nearly as reasonably may be, to any such other securities, cash and assets deliverable upon conversion of the Series D Shares or other convertible stock or securities received by the Series D Holders in place thereof, and any such successor or transferee corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such other securities, cash or assets as the Series D Holders, or other convertible stock or securities received by the Series D Holders in place thereof, shall be entitled to receive pursuant to the provisions hereof, and to make provision for the protection of the conversion right as above provided. In case securities other than Common Stock, cash or assets shall be issuable, payable or deliverable by the Corporation upon conversion as aforesaid, then all references in this Paragraph B.4.E shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities, cash or assets. This provision shall similarly apply to successive reorganizations, reclassifications or Mergers. F. Series D Conversion Method. Any Series D Holder may, at any time prior to the close of business on the Series D Redemption Date for such Series D Shares, exercise the conversion rights as to such Series D Shares by delivering to the Corporation during regular business hours, at the office of the then transfer agent for the Series D Shares or at such other place as may be designated in writing delivered to all Series D Holders by the Corporation, at least ten (10) business days prior to the requested date for conversion, a notice requesting conversion on a specified date and the certificate for the Series D Shares to be converted, duly endorsed in blank or for transfer to the Corporation (if required by it), or accompanied by separate instruments of transfer satisfactory to the Corporation, in either case sufficient to transfer the Series D Shares being converted free of any adverse claim, and written notice stating the number of Series D Shares represented by such certificate that the Series D Holder elects to convert. The notice shall also state the names and addresses of the persons to whom certificates for shares of Common Stock shall be issued, the denominations of such certificates and reasonable delivery instructions with respect thereto. A notice failing to meet the foregoing requirements shall not be valid or effective for any purpose. (The Corporation may (but shall have no obligation to) from time to time waive the requirement of ten (10) days written notice.) Each conversion shall be deemed to have been effected immediately on the close of business on the date specified in such notice (the "Series D Conversion Date"), and the person in whose name any certificate for shares of Common Stock is issuable upon the conversion shall be deemed to have become the holder of record of the Common Stock at such time. If the stock transfer books of the Corporation are closed on the Series D Conversion Date, the Series D Conversion Date for purposes of determining record ownership shall be the next succeeding day in which the stock transfer books are open (and the conversion shall be deemed to have been effected immediately prior to the close of business on that day), but in all cases the conversion shall be at the Series D Conversion Price in effect on the Series D Conversion Date specified in the notice of conversion. As promptly as practicable after the Series D Conversion Date (but in any event within ten (10) business days), the Corporation shall issue and deliver to such Series D Holder, at the expense of the Corporation and in accordance with such Series D Holder's delivery instructions, a certificate or certificates for the number of full shares of Common Stock to which such Series D Holder is entitled and a check or cash with respect to any fractional interest in a share of Common Stock as provided in Paragraph B.4.G below. Upon conversion of only a portion of the Series D Shares represented by a certificate surrendered for conversion, the Corporation shall issue and deliver to such Series D Holder, at the expense of the Corporation, a new certificate covering the number of Series D Shares representing the unconverted portion of the certificate so surrendered and which new certificate shall entitle the Series D Holder thereof to the same rights of the Series D Shares represented thereby as if the certificate theretofore covering such unconverted Series D Shares had not been surrendered for conversion. G. Fractional Shares of Common Stock. No fractional shares of Common Stock or scrip shall be issued upon conversion of Series D Shares. If more than one Series D Share shall be surrendered for conversion at any one time by the same Series D Holder, the number of full shares of Common Stock issuable upon conversion of such Series D Shares shall be computed on the basis of the aggregate number of Series D Shares so surrendered. Instead of any fractional shares of Common Stock which otherwise would be issuable upon conversion of any Series D Shares, the Corporation shall pay a cash adjustment in respect of such fractional interest based upon the Series D Conversion Price in effect at the close of business on the last business day prior to the Series D Conversion Date. H. Taxes. All shares of Common Stock issued upon conversion of Series D Shares will be validly issued, fully paid and nonassessable. The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Series D Shares pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Series D Shares so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such transfer has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid or that no such tax is payable. I. Surrendered Series D Shares. All certificates representing Series D Shares surrendered for conversion or Series D Redemption shall be appropriately cancelled on the books of the Corporation and the Series D Shares so converted or redeemed represented by such certificates shall be restored to the status of authorized but unissued Series D Shares. J. Market Price. For purposes hereof, the term "Market Price" on any day shall mean the average of the closing prices (as defined below) per share of Common Stock on the New York Stock Exchange, Inc. ("NYSE") if the Common Stock is listed thereon, or, if not so listed, on the principal national stock exchange on which the Common Stock is then listed, or, if not so listed, on the National Association of Securities Dealers Inc. Automated Quotation System (the "NASDAQ System"), in each case, for the 20 consecutive Trading Days immediately preceding the date of determination. A "Trading Day" is a business day in which the principal market on which the Common Stock is traded is open for trading for at least four hours. As used herein, the "closing price" per share of Common Stock for each day shall be the last reported sales price per share, regular way on such day, or if there are no sales on such day, on the immediately preceding day on which such sales occurred; provided that if at the time of any computation pursuant to this paragraph the Common Stock is not then traded on any trading market, the "Market Price" for the purposes hereof shall be the fair value as reasonably determined in good faith by the Board of Directors of the Corporation. K. Available Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of Series D Shares, such number of shares of Common Stock as shall from time to time be sufficient to effect a conversion of all outstanding Series D Shares under Paragraph B.4.A, as such number may from time to time be adjusted pursuant to Paragraph B.4.D, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding Series D Shares, the Corporation shall promptly take such corporate action as may, in the opinion of its counsel and subject to any necessary approval of its stockholders, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. L. Notice to Series D Holders. In the event (i) the Corporation shall declare a dividend or other distribution on the Common Stock other than regular cash dividends declared in the ordinary course or dividends or other distributions payable in Common Stock, (ii) the Common Stock is subdivided, combined or reclassified, (iii) of a Merger, or (iv) of a Liquidation, or (v) the Corporation offers for subscription pro rata to holders of Common Stock any additional shares of stock of any class or series or other rights, then the Corporation shall mail to each Series D Holder at the Series D Holder's address as it appears in the stock records of the Corporation promptly and in any event at least 15 days prior to the date described in clause (a) below, a notice stating (a) the date for the determination of holders of Common Stock entitled to receive the distribution, subscription rights or the consideration in the Merger or Liquidation, or (b) the date of determination as to which shares of Common Stock will be affected by a subdivision, combination, reclassification, (c) a brief statement of the facts requiring such notice, and (d) if applicable, that the Series D Conversion Price shall be adjusted in accordance with this Paragraph B.4. Upon any adjustment in the Series D Conversion Price, the Corporation shall mail to each Series D Holder at the Series D Holder's address as it appears in the stock records of the Corporation a notice setting forth the adjusted Series D Conversion Price and the method of calculation thereof, provided that, if such address is outside of the United States, then such notice shall be sent by facsimile transmission (if such Series D Holder shall have provided a facsimile number). M. Conclusive Determination. Whenever the Series D Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the transfer agent for the Common Stock, a certificate of a firm of independent public accountants regularly employed by the Corporation setting forth the adjusted Series D Conversion Price, along with a brief statement of the facts requiring the adjustment and the manner of computing the adjustment which certificate shall be conclusive evidence of the correctness of the adjustment, absent manifest error. 5. Series D Redemption Rights 5.1 Series D Redemption. The Corporation may, at its option, at any time after October 20, 2000, and from time to time thereafter, redeem (a "Series D Redemption") at the price determined herein ("Series D Redemption Price"), from funds legally available therefor, all or any portion of the outstanding Series D Shares (not thereafter converted at any time prior to the Series D Redemption Date in accordance with Paragraph B.4) at the Series D Redemption Price which shall be the Series D Liquidation Preference plus all accrued but unpaid Series D Dividends (other than accrued but unpaid Series D Dividends added to Series D Liquidation Preference pursuant to Paragraph B.1.1.D) through the Series D Redemption Date only if there has occurred a Series D Redemption Event (as defined in Paragraph B.5.3) and only if prior to the giving of the Series D Redemption Notice (as hereinafter defined) all Series D Dividends have been paid through the end of the most recent Series D Quarterly Payment Period (including accrued but unpaid Series D Dividends added to Series D Liquidation Preference pursuant to Paragraph B.1.1.D). 5.2 Notice of Series D Redemption. If the Corporation elects to redeem any or all Series D Shares pursuant to a Series D Redemption, the Corporation shall (a) give written notice of such Series D Redemption within ten (10) days after the occurrence of the applicable Series D Redemption Event ("Series D Redemption Notice") to each Series D Holder of Series D Shares to be redeemed at its address as it appears on the stock records of the Corporation by deposit thereof in first class U.S. mail, postage prepaid, and, in the case of a Series D Holder with an address outside of the United States, a Series D Redemption Notice shall be sent by facsimile transmission (if such Series D Holder shall have provided a facsimile number), and (b) set aside an amount equal to the Series D Redemption Price of all Series D Shares subject to Series D Redemption at that time for the benefit of all Series D Holders of Series D Shares subject to Series D Redemption apart from its other funds, and the Series D Shares then subject to Series D Redemption and not otherwise converted in accordance with Paragraph B.4 shall, on the date which is twenty (20) business days after the deposit of the Series D Redemption Notice in accordance with clause (a) of this sentence (the "Series D Redemption Date"), cease to be outstanding and the rights of the Series D Holders and owners thereof shall be limited to payment of the Series D Redemption Price thereof plus accumulated Series D Dividends through the Series D Redemption Date in accordance with the terms hereof. The Corporation shall mail to each Series D Holder of a Series D Share tendered for Series D Redemption the Series D Redemption Price thereof by check within ten (10) days after the Corporation shall receive at its principal office a certificate representing the applicable Series D Share (or an affidavit of lost certificate and indemnity therefor in a form prescribed by the Board of Directors) duly endorsed in blank for transfer to the Corporation (if required by it), accompanied by instruments of transfer satisfactory to the Corporation and sufficient to transfer the Series D Shares being redeemed free of any adverse claim. Should any Series D Holder not receive payment of any amounts due on Series D Redemption of its Series D Shares at the times prescribed by reason of the Corporation's failure to give a Series D Redemption Notice at the times or in the manner prescribed above or to make payment at the times prescribed above for any reason other than the Series D Holder's failure to tender its Series D Shares (or affidavit and indemnity) and instruments of transfer as provided above, the Corporation shall pay to the applicable Series D Holder on demand (x) interest on the sums not paid when due at an annual rate equal to two percent in excess of the "Prime Rate" that is then in effect or announced by Chemical Bank, New York, New York, or its successor, compounding at the end of each thirty (30) days, until the applicable Series D Holder is paid in full and (y) all costs of collection, including but not limited to attorneys' fees and costs, whether or not suit or other formal proceedings are instituted. The Series D Redemption Price shall (in the discretion of the Board of Directors of the Corporation) be adjusted to take into account any stock split or other similar change in the Series D Shares. 5.3 Series D Redemption Event. A "Series D Redemption Event" shall occur with respect to any Series D Share (a) on the tenth day following any ten (10) consecutive Trading Days in which the Market Price is equal to or greater than 150% of the Series D Conversion Price of such Series D Share or (b) in the event of a Redemption Event Merger in which the consideration to be paid to holders of the Common Stock in the Redemption Event Merger is either payable entirely in cash or is property with a fair market value (as reasonably determined in good faith by the Board of Directors of the Corporation) of not less than 150% of the Series D Conversion Price of such Series D Share on the date fixed for purposes of determining the holders of Common Stock entitled to receive consideration in the Redemption Event Merger. 5.4 Selection of Shares. The Corporation shall select the Series D Shares to be redeemed in any Series D Redemption in which not all Series D Shares are to be redeemed so that the Series D Shares of each Series D Holder selected for Series D Redemption shall bear the same proportion to the total Series D Shares owned by that Series D Holder as the proportion of all Series D Shares selected for Series D Redemption bears to the total of all then outstanding Series D Shares, but adjusted as determined by the Board of Directors to avoid the redemption of fractional Series D Shares. Should any Series D Shares required to be redeemed under the terms hereof not be redeemed solely by reason of limitations imposed by law, the applicable Series D Shares shall be redeemed on the earliest possible date thereafter that the applicable Series D Shares may be redeemed to the maximum extent permitted by law. Except as set forth above, the Board of Directors shall prescribe the manner in which any Series D Redemption shall be effected. Any monies set aside by the Corporation for the holders of Series D Shares subject to Series D Redemption which shall not be claimed at the end of one (1) year after the first service of the applicable Series D Redemption Notice shall be released and repaid to the Corporation but shall be paid to the Series D Holder of the applicable Series D Shares so long as submission of its shares occurs within five (5) years after the first service of the applicable Series D Redemption Notice. 6. Ranking of Stock of the Corporation For purposes hereof, any stock of any class or classes of the Corporation shall be deemed to rank: A. Prior to the Series D Shares, either as to dividends or upon liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in preference or priority to the Series D Holders; B. On a parity with the Series D Shares, either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share or sinking fund provisions, if any, are different from those of the Series D Shares, if the holders of such stock shall be entitled to the receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up of the Corporation, as the case may be, in proportion to their respective dividend rates or liquidation prices, without preference or priority, one over the other, as between the holders of such stock and the Series D Holders; and C. Junior to the Series D Shares, either as to dividends or upon liquidation, if such class shall be Common Stock or if the Series D Holders shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation, winding up of the Corporation, or upon redemption as the case may be, in preference or priority to the holders of shares of such class or classes. FIFTH: A. Management Vested in the Board of Directors. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. In furtherance of and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind the Amended and Restated Bylaws of the Corporation. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Amended and Restated Bylaws of the Corporation from time to time. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the Corporation would have if there were no vacancies. No election of directors need be by written ballot. B. Terms of Directors. Each director shall serve for a term ending on the date of the next annual meeting following the meeting at which such director was elected, or such later date as such director's successor shall have been elected and qualified. Advance notice of shareholder nominations for the election of directors shall be given in the manner provided in the Amended and Restated Bylaws of the Corporation. C. Appointment of New Directors. Except as otherwise provided, newly created directors resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. D. Removal of Directors. The entire Board or any individual director may be removed from office, with or without cause, by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of directors. E. Liability of Directors. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. SIXTH: Meetings of stockholders may be held within or without the State of Delaware, as the Amended and Restated Bylaws may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Amended and Restated Bylaws of the Corporation. SEVENTH: The Corporation is to have perpetual existence. EIGHTH: No holder of any Shares shall be entitled as of right to subscribe for, purchase, or otherwise acquire any Shares of any capital stock of the Corporation which the Corporation proposes to issue or any rights or options which the Corporation proposes to grant for the purchase of Shares of any class of the Corporation or for the purchase of any Shares, bonds, securities, or obligations of the Corporation which are convertible into or exchangeable for, or which carry any rights to subscribe for, purchase, or otherwise acquire Shares of any class of capital stock of the Corporation; and any and all of such Shares, bonds, securities or obligations of the Corporation, whether now or hereafter authorized or created, may be issued, or may be reissued or transferred if the same have been reacquired and have treasury status, and any and all of such rights and options may be granted by the Board of Directors to such persons, firms, corporations and associations, and for such lawful consideration, and on such terms, as the Board of Directors in its discretion may determine, without first offering the same, or any thereof, to any said holder. NINTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have the power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. TENTH: Except as may otherwise be specifically provided in this Amended and Restated Certificate of Incorporation, no provision of this Amended and Restated Certificate of Incorporation is intended by the Corporation to be construed as limiting, prohibiting, denying, or abrogating any of the general or specific powers or rights conferred under the General Corporation Law upon the Corporation, upon its shareholders, bondholders, and security holders, and upon its directors, officers, and other corporate personnel, including, in particular, the power of the Corporation to furnish indemnification to directors and officers in the capacities defined and prescribed by the General Corporation Law and the defined and prescribed rights of said persons to indemnification as the same are conferred by the General Corporation Law. ELEVENTH: From time to time any of the provisions of this Amended and Restated Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the shareholders of the Corporation by this Amended and Restated Certificate of Incorporation are granted subject to the provisions of this Article ELEVENTH. TWELFTH: The effective time of the original Certificate of Incorporation of the Corporation, and the time when the existence of the Corporation commenced, is March 15, 1988. Signed on [____________], 1994. LIVE ENTERTAINMENT INC. By: _____________________________________ [_____________], President ATTEST: __________________________________ [___________], Secretary EX-9.3(B) 7 EXHIBIT TO EX-2.1 Exhibit 9.3(b) Amendments to LIVE Increasing Rate Notes Indenture For purposes of this Exhibit 9.3(b) only, the LIVE Increasing Rate Notes shall be referred to as the "Notes" and the LIVE Increasing Rate Notes Indenture shall be referred to as the "Indenture". Other capitalized terms used herein shall have the meaning ascribed to them in the Indenture, except that "Effective Date" shall have the meaning ascribed to it in the Agreement. The Indenture will be amended as follows: 1. Definitions. The definition of Senior Debt in the Indenture will be expanded to provide that any indebtedness which by its terms is stated to be senior to the Notes will be treated as senior debt; the definition of the Bank Credit Facilities will be amended to include Carolco and LHV bank credit facilities (including guarantees thereof); and conforming changes will be made. 2. Section 2.12 (Payment of Interest; Interest Rights Preserved). A technical change will be made to clarify how interest is paid after a default. 3. Section 3.02 (Optional Redemption). LIVE will be allowed to redeem part, as well as all, of the Notes. 4. Section 4.05 (Compliance Certificate). An amendment will be made to conform the requirements in the Indenture with Carolco's indentures -- only an Officer's Certificate will be required and no certificate of LIVE's outside independent certified public accountants will be required. 5. Section 4.10 (Ownership of Stock of Wholly Owned Subsidiaries). LIVE is required to maintain each of its wholly owned subsidiaries as a 100% subsidiary unless disposed of in full. This provision will be removed. 6. Section 4.15 (Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries). This provision restricts Subsidiaries from agreeing to limits on the payment of dividends, making loans or repaying indebtedness to LIVE except as may be imposed in the Bank Credit Facilities. This provision will be modified to make a clear that product acquisition transactions may also create such restrictions. 7. Section 4.16 (Restrictions on Sale and Issuance of Restricted Subsidiary Preferred Stock). This provision restricts LIVE from allowing its Subsidiaries to issue preferred stock to third parties unless LIVE could incur debt in like amount. This provision will be removed. 8. Section 4.17 (Restricted Payments and Investments). The prohibition on Restricted Payments and Restricted Investments will not apply if LIVE is not in default. 9. Section 4.18 (Limitation on Additional Indebtedness). This provision will removed. 10. Section 4.20 (Limitation on Creation of Liens). This provision will be removed. 11. Section 4.21 (Company or Subsidiaries May Consolidate, etc. only on Certain Terms). There will be no restriction on the ability of Subsidiaries to merge with each other, liquidate or take other actions. LIVE will be allowed to merge, etc., as long as the surviving company assumes the Notes, LIVE is not in default and no default will be caused by the merger, and the net worth of the resulting comparing is no less than the net worth of LIVE prior to the merger. 12. Section 4.22 (Rank of Future Debt). This provision will be removed. 13. Section 4.23 (Consolidated Net Worth). This provision will be removed. 14. Section 6.01 (Events of Default). The cross default provisions in this Indenture will be conformed to those in Carolco's indentures by increasing the cross default threshold from $3 million to $5 million, changing the grace periods and increasing the number of holders required to notice an Event of Default. 15. Section 6.02 (Acceleration). The percentage required to accelerate for a monetary default will be changed from 25% to 33-1/3% EX-3.3B 8 EXHIBIT TO EX-2.1 Exhibit 3.3B Officers of Carolco Entertainment Inc. at Effective Date Mario F. Kassar Chief Executive Officer Lynwood Spinks Executive Vice President/President of Production William A. Shpall Executive Vice President and Chief Financial Officer Karen A. Taylor Senior Vice President/Finance Robert W. Goldsmith Senior Vice President, General Counsel and Corporate Secretary EX-10.1(F) 9 EXHIBIT TO EX-2.1 EXHIBIT 10.1(f) Terms Of Aggregate Working Capital Commitments B. Carolco CUTTHROAT ISLAND DRAFT SHEET WITHOUT COMMITMENT FOR DISCUSSION PURPOSES ONLY Borrower: A single purpose company ("Borrower") established under the laws of the Netherlands Antilles, and wholly or majority-owned directly or indirectly by Carolco Pictures Inc. ("CPI"). Lenders: A syndicate of banks with CLBN holding up to a 30% share of the facility. Facility: A senior secured credit facility consisting of a single non-revolving project loan. Purpose: To finance (a) a portion of the approved budget of the feature film currently entitled "Cutthroat Island" plus (b) Fees, Expenses and Interest thereon. Commitment: Up to 63,000,000 in the aggregate (the "Project Loan"); provided, however, that 7,000,000 of the Project Loan shall be reserved to pay Fees, Expenses and Interest on the Project Loan. Maturity: Earlier of March 1, 1997 or fifteen months following initial theatrical release. Security: Collateralized by an assignment of firm pre-sale contracts from acceptable obligors/distributors or backed by irrevocable letters of credit. Completion Bond: To satisfaction of Lenders. M:\LIVE\JKM4A65.WP Execution EX-10.1(F) 10 EXHIBIT TO EX-2.1 EXHIBIT 10.1(f) Terms of Aggregate Working Capital Commitments A. LIVE LIVE shall arrange a working capital line for LHV from a group of commercial lenders in principal amount between $30,000,000 and $40,000,000 for a period of at least 12 months after the line becomes effective. The line will be generally available for LHV's business operations and borrowers thereunder will include LHV and substantial subsidiaries of LIVE and LHV. LIVE will be a guarantor of the New LIVE Credit Facility. Covenants and security will generally parallel those in the LIVE Credit Facility. The New LIVE Credit Facility will become effective prior to the expiration of the LIVE Credit Facility. EX-10.4 11 EXHIBIT 10.4 EXHIBIT 10.4 MGM INVESTOR REPRESENTATION AGREEMENT As a condition to LIVE ENTERTAINMENT INC., a Delaware corporation ("LIVE"), CAROLCO ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of LIVE ("CAC"), and CAROLCO PICTURES INC., a Delaware corporation ("Carolco"), entering into an Agreement and Plan of Merger dated as of August 10, 1994 (the "Merger Agreement"), the undersigned Carolco shareholder ("Significant Shareholder") hereby enters into this Investor Representation Agreement (this "Agreement"). WHEREAS, pursuant to the Merger Agreement and in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the "DGCL"), CAC will merge with and into Carolco with Carolco surviving (the "Merger") and, pursuant to the Merger, (i) the issued and outstanding shares of common stock, par value $.01 per share, of Carolco ("Carolco Common Stock") shall be converted into, and become exchangeable for, shares of common stock, $.01 par value per share, of LIVE ("LIVE Common Stock") as set forth in the Merger Agreement; and (ii) each issued and outstanding share of Series A Convertible Preferred Stock of Carolco ("Carolco Series A Preferred Stock") shall be converted into, and become exchangeable for, one share of Series D Convertible Preferred Stock of LIVE, par value $1.00 ("LIVE Series D Preferred Stock"); and WHEREAS, Carolco, LIVE, and CAC are willing to consummate the Merger only if such transaction will qualify as a tax free transaction under the Internal Revenue Code of 1986, as amended. NOW, THEREFORE, THE SIGNIFICANT SHAREHOLDER AGREES AS FOLLOWS: A. The Significant Shareholder represents to LIVE and Carolco as follows: 1. The Significant Shareholder represents that as of the date hereof it (a) is the record and beneficial owner of (x) no shares of Carolco Common Stock and 30,000 of Carolco Series A Preferred Stock (collectively, the "Carolco Shares") and (y) no shares of LIVE Common Stock and no shares of Series C Convertible Preferred Stock of LIVE, par value $1.00 per share (collectively, the "LIVE Shares") and (b) has the power to vote or consent as to matters concerning the Carolco Shares. 2. The Significant Shareholder (a) represents that, as of the date hereof, it has no plan or intention to, and (b) agrees that, prior to the Effective Date as defined in Section 1.2 of the Merger Agreement, it will not form a plan or intention or enter into an arrangement to sell, transfer or otherwise dispose of any of the shares of LIVE Common Stock and/or LIVE Series D Preferred Stock to be received in the Merger by the Significant Shareholder. B. The Significant Shareholder agrees as follows: 1. On or prior to the Effective Date, it will not sell, transfer or otherwise dispose of any of its shares of Carolco Common Stock or Carolco Series A Preferred Stock. 2. Until the Effective Date, it will not grant a proxy with respect to, or otherwise encumber, any of its Carolco Shares, nor will it acquire any additional Carolco Shares unless the Significant Shareholder executes an amendment whereby such additional shares become subject to this Agreement. The Significant Shareholder agrees that until the Effective Date it will not (i) deposit any Carolco Shares into any voting trust or similar arrangement, (ii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing, or (iii) take any action inconsistent with any of the foregoing. The Significant Shareholder further agrees that, subject to its receipt of the Prospectus and Joint Proxy Statement pursuant to which Carolco and LIVE propose to solicit proxies from their respective shareholders in connection with the Merger and the transactions contemplated thereby (the "Prospectus"), it will vote all of the Carolco Shares in favor of the Merger and the transactions contemplated hereby. 3. The Significant Shareholder consents to disclosure in the Prospectus of its intention to vote for the Merger and the transactions contemplated in the Merger Agreement. 4. The Significant Shareholder agrees to proceed with the proposed transactions on a prompt basis and to use its reasonable best efforts to prepare all documentation, obtain all necessary consents, authorizations, approvals and waivers required in connection with the consummation of the Merger (including any filings required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to such Significant Shareholder) and take all other actions necessary to consummate the transactions contemplated hereby in a manner consistent with applicable law, including, but not limited to, executing the Carolco Entertainment Registration Rights Agreement attached to the Merger Agreement as Exhibit 9.10 (the "Carolco Entertainment Registration Rights Agreement"). 5. The Significant Shareholder accepts and agrees to the terms of the Carolco Entertainment Registration Rights Agreement and agrees that such agreement shall supersede and replace all registration rights existing as of the Effective Date with respect to all Carolco securities owned by it as of the Effective Date. C. This Agreement will terminate upon the earlier to occur of (i) the Effective Date (other than with regard to Paragraph A.2 of this Agreement) and (ii) the termination of the Merger Agreement pursuant to the terms of Section 11.1 thereof, but in no event later than December 31, 1994 unless an extension of such date is agreed to by the Significant Shareholder. D. In the event of a waiver by Carolco of any material condition, covenant or breach, or in the event of an amendment of any material term, of the Merger Agreement without the consent of the Significant Shareholder, then the Significant Shareholder shall be entitled to rescind this Agreement within five (5) business days of receipt of notice of such waiver or amendment. IN WITNESS WHEREOF, the undersigned has duly executed this Agreement on August 10, 1994. MGM HOLDINGS CORPORATION By: /s/Rene-Claude Jouannet Name: Rene-Claude Jouannet Its: President and Treasurer Agreed to and accepted as of the date first written above: CAROLCO PICTURES INC. By: /s/ Robert W. Goldsmith Name: Robert W. Goldsmith Its: Senior Vice President -----END PRIVACY-ENHANCED MESSAGE-----