-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TsO76Q3pFAvevy5tb1QO3ISNex6lNv+Ze9R96LalVp/OOB4d55YSF7qS0GAp2nqQ BwnDCMjnnp8LWAixizJ7PA== 0000910680-97-000270.txt : 19970930 0000910680-97-000270.hdr.sgml : 19970930 ACCESSION NUMBER: 0000910680-97-000270 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970929 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLARK DICK PRODUCTIONS INC CENTRAL INDEX KEY: 0000805370 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 232038115 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15192 FILM NUMBER: 97687743 BUSINESS ADDRESS: STREET 1: 3003 W OLIVE AVE CITY: BURBANK STATE: CA ZIP: 91510 BUSINESS PHONE: 818-841-3003 MAIL ADDRESS: STREET 1: 3003 W. OLIVE AVENUE CITY: BURBANK STATE: CA ZIP: 91505 10-K 1 FORM FISCAL YEAR ENDED JUNE 30, 1997 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 1997. [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) COMMISSION FILE NUMBER : 33-79356 dick clark productions, inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 23-2038115 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3003 W. Olive Avenue, Burbank, California 91510-7811 - ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (818) 841-3003 - ----------------------------------------------------------------- Common Stock, par value $.01 - ---------------------------- (Title of Class) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] or No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] or No [_] The aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant computed by reference to the closing sales price as quoted on NASDAQ on September 23, 1997, was approximately $15,239,000. As of September 23, 1997, 7,631,500 shares of Registrant's $.01 par value common stock and 750,000 shares of the Registrant's $.01 par value Class A common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement relating to the Annual Meeting of Shareholders to be held November 4, 1997, are incorporated by reference into Part I and Part III of this Report. PART I ITEM 1. BUSINESS BACKGROUND - ---------- dick clark productions, inc. was incorporated in California in 1977 and was reincorporated in November 1986 as a Delaware corporation. As used in this Report, unless the context otherwise expressly requires, the term "Company" refers to dick clark productions, inc. and its predecessors and their respective subsidiaries. The Company develops and produces a wide range of television programming for television networks, first-run domestic syndicators (which provide programming for independent and network affiliated stations), cable networks and advertisers. Since 1957, the Company has been a significant supplier of television programming and has produced thousands of hours of television entertainment, including series, annual, recurring and one-time specials and movies for television. The Company also licenses the rebroadcast rights to some of its programs, licenses certain segments of its programming to third parties and from time to time produces home videos. In addition, the Company, on a limited basis, develops and produces theatrical motion pictures, which are generally produced in conjunction with third parties who provide the financing for such motion pictures. Since fiscal 1990, the Company has operated entertainment-themed restaurants known as Dick Clark's American Bandstand Grill(R). In fiscal 1992, the first restaurant developed by the Company was opened in Overland Park, Kansas, a suburb of Kansas City. Since that time, the Company has opened seven additional locations, most recently in St. Louis, Missouri; Austin, Texas; and, King of Prussia, Pennsylvania. The Company is also a majority owner in a joint venture that in 1993 opened a dance-club-only version of the restaurant, "Dick Clark's American Bandstand Club," located in Reno, Nevada. Although the dance club concept has been successful, the Company has chosen to focus its expansion efforts primarily on the restaurant concept, which the Company believes has a broader market appeal and greater potential for future revenue growth. It is the Company's long-term objective to continue to develop its entertainment-themed restaurant concept by opening additional Company-operated restaurants in strategically desirable markets. The Company anticipates opening additional restaurants during fiscal 1998 and is actively negotiating for additional sites for new restaurants for this growing national chain. In January 1991, the Company established a subsidiary, dick clark corporate productions, inc. ("dccp"), in order to enter the corporate productions and communications business. This subsidiary specializes in development and execution of non-traditional marketing communications programs, corporate meetings and special events, new product introductions, trade shows and exhibits, event marketing, film, video and leisure attractions. The Company's strategy is to add value to its clients by accessing the wide range of talent and production resources the Company utilizes for television production and by providing a level of creativity, production quality and efficiency that is uncommon in this market. Since its inception, the Company's principal stockholder has been Richard ("Dick") W. Clark, who the Company believes to be one of the best-known personalities in the entertainment industry. Many of the Company's television and corporate programs involve the executive producing services and creative input of Mr. Clark. However, Mr. Clark's performance services are not exclusive to the Company. The Company also employs other experienced producers who are actively involved in the Company's television production business and dccp's business. The Company's principal lines of business according to industry segments are television production and related activities (including, without limitation, the aforementioned operations of dccp) and restaurant operations (dick clark restaurants, inc. and its wholly owned subsidiaries). For financial information about the Company's industry segments with respect to each of the fiscal years in the three-year period ended June 30, 1997, see Note 9 "Business Segment Information" to the Company's Consolidated Financial Statements on page 28 of the Company's 1997 Annual Report. 2 DESCRIPTION OF BUSINESS TELEVISION PRODUCTION AND RELATED BUSINESS ------------------------------------------ Introduction - ------------ Historically, the Company has produced entertainment television programming for daytime, primetime and late night telecast and has become one of the most versatile independent production companies in the entertainment business today. The Company's programming mix includes awards shows, entertainment and comedy specials and series, children's programming, talk and game show series, movies-for-television, and dramatic series. Many of the established television specials are produced annually and have become an expected television event. This breadth of production, together with the Company's reputation for developing high-quality, popular shows on budget, distinguishes the Company as a unique and highly regarded programming provider. This is particularly significant with the growing demand for cost-efficient, original programming from new cable networks, advertisers and syndicators. The Company has generally been able to fund its production costs from license fees paid by the recipients of the programming. However, increasing consolidation in the entertainment industry has resulted in many of the Company's traditional customers (such as the television networks) merging with its competitors who provide entertainment production services. As a result, the Company's ability to market its programming expertise has been reduced. In addition, the proliferation of cable networks over the last decade has also resulted in smaller license fees being paid by networks and other broadcasters. In particular, the development and production of situation comedies and dramatic series generally now require substantial deficit financing because the license fees payable for such programs do not cover production costs. Consequently, the Company is selective in its development efforts in the dramatic and situation comedy series area. Programming in which the Company owns the distribution rights and which are not subject to restrictions associated with the initial license agreement may be marketed by the Company in ancillary markets which include, among others, cable television, foreign and domestic rerun syndication and home video. Successful television series and television movies can have significant rerun syndication and other ancillary value. However, a television series must normally be broadcast for at least three or four television seasons before rerun syndication is feasible. Consequently, a relatively low percentage of television series are successful enough to be syndicated. Television Market, Production and Licensing - ------------------------------------------- Market. The market for television programming is composed primarily of the broadcast television networks (ABC, CBS, NBC, Fox Broadcasting Company, United Paramount Network and Warner Bros., a division of Time Warner Entertainment Company L.P.), syndicators of first-run programming (such as Columbia, Inc. and Buena Vista Television) which license programs on a station-by-station basis, and basic and pay cable networks (such as The Family Channel, The Nashville Network and VH-1). The Company also deals directly with companies such as Busch Entertainment Corp., Universal Studios Hollywood and SFM Entertainment, which finance the production of specials and other programming on which they intend to advertise their products. The Company also works closely with dccp to provide television expertise to those corporations seeking television outlets for their events and promotions. Production. The production of television programming involves the development of a format based on a creative concept or literary property into a television script or teleplay, the selection of talent and, in most cases, the filming or taping and technical and post-production work necessary to create a finished product. The Company is continuously engaged in developing and acquiring concepts and literary properties. The most promising of these serve as the basis of a plot or concept which may include a description of the principal characters or performers, and in the case of a dramatic presentation, may contain sample dialogue. The development of a project often begins with a meeting of the Company's development personnel, producers, directors and/or writers for the purpose of reviewing a concept. Many of the Company's projects originate with its own staff, although due to the Company's reputation in the television industry, concepts for development are frequently presented to the Company by unaffiliated parties. If a concept is attractive, the Company will present it to a prospective licensee: either one of the television networks, a first-run syndicator, a cable network or an advertiser. Alternatively, a prospective licensee, in particular, an advertiser, will often request that the Company develop a concept for a particular time period or type of audience. If a concept is accepted for further development, the prospective licensee will usually commission and pay for a script 3 prior to committing itself to the production of a program. However, in the case of the Company's entertainment programming as well as its awards specials, the licensee will generally order production of the program based on the initial presentation. Only a small percentage of the concepts and scripts presented each year are selected to be produced. Generally, the network or other licensee retains the right to approve the principal creative elements of a television production. Once a script and/or a concept is approved by the licensee, a license fee is negotiated and pre-production and production activities are undertaken. In the case of a game show, a finished pilot episode usually is submitted for acceptance as a series before additional episodes are ordered. A production order for a series is usually for a specified number of episodes, with the network or other licensee retaining an option to renew the license. The production of additional episodes for a series or additional versions of a special is usually dependent on the ratings obtained by the initial run of episodes of the program or by the original special, respectively. Licensing. A majority of the Company's revenue is derived from the production and licensing of television programming. The Company's television programming is licensed to the major television networks, cable networks, domestic and foreign syndicators and advertisers. The Company also receives production fees from programming buyers who retain ownership of the programming. The Company has sold or licensed its programs to all of the major networks and to a number of first-run syndicators, cable broadcasters and advertisers. During fiscal 1997, revenue from a recurring annual special represented approximately 14% of total revenue. During fiscal 1996, revenue from three customers individually accounted for more than 12% but not greater than 15% of the Company's revenue. During fiscal 1995, revenue from two customers individually accounted for more than 14% but not greater than 24% of the Company's revenue. See Note 2 "Summary of Significant Accounting Policies" to the Company's Consolidated Financial Statements on page 22 of the Company's 1997 Annual Report. The Company is not committed exclusively to any one network, syndicator, cable network or other licensee for the licensing of the initial broadcast rights to all or any substantial part of any other Company's programming. The Company's strategy is to develop programming that does not require deficit financing, such as reality and variety series and award and other event specials, which have the potential to be profitable in the first year of release as well as to be renewed annually. The typical license agreement for this type of programming provides for a fixed license fee to be paid in installments by the licensee to the Company for the right to broadcast a program or series in the United States for a specified number of times during a limited period of time. In some instances, the Company shares its percentage of net profits from distribution with third parties who contributed to the production of the program. In the case of license agreements involving specials or music, variety or game show series, the fixed license fee is ordinarily in excess of production and distribution costs. For selected projects, however, the Company may elect to produce programming for which the initial license fees will not cover its production and distribution costs in the first year of a project's release. None of the Company's television production in fiscal 1997 required any material deficit financing by the Company. The Company does anticipate incurring deficit financing in connection with the production of a children's series to be delivered in fiscal 1998. The Company does not anticipate incurring any material deficit financing obligation with respect to any other programs which are currently in development. During the term of a first-run broadcast license, the Company generally retains all other distribution rights associated with the program, including all foreign distribution rights. In the case of television movies, the Company will often pre-sell domestic, foreign and other rights in order to cover all of the production and distribution costs for the television movie. From time to time, the Company has entered into non-exclusive agreements with distribution companies (such as Alfred Haber, Inc. and World International Network, LLC) for the foreign distribution of certain of its series, specials and television movies. The Company also occasionally licenses its programming directly to foreign broadcasters. After the expiration of a first-run broadcast license, the Company makes the program available for other types of domestic distribution in cases where the Company has retained ownership and/or distribution rights to the program. In fiscal 1997, the Company licensed 118 half-hour episodes of its Super Bloopers and Practical Jokes series (which had previously been broadcast on NBC as one hour shows) to the Family Channel. In fiscal 1996, the Company licensed 22 episodes of Super Bloopers and Practical Jokes (previously broadcast on NBC) to the Family Channel along with 23 hours of specials for a three-year term. The Company also licensed to VH-1, the cable music network, the exclusive rights to re-broadcast 50 episodes from the original American Bandstand series in fiscal 1996 and an additional 50 episodes in fiscal 1997. The Company has retained the rights to the clips in these shows for use in its own productions as well as the ability to continue to market the clips to its media archive customers. The Company also licenses the syndication rights to television movies from its library, which the Company is often able to syndicate a number of times over a period of many years. For example, in each of fiscal 1995, 1996 and 1997, the Company licensed the previously broadcast television movie The Man in the Santa Claus Suit. The Company has also used its library of entertainment and music specials to create new programming. 4 Television Programming - ---------------------- The Company has in development and production numerous television projects for broadcast on network television, first-run syndication and cable television. The Company has an established reputation among the major networks, cable broadcasters and other licensees as a premier producer of television awards programming. The Company is also strongly committed to the ongoing development of entertainment specials and series which include music, variety, dramatic and comedy programming formats as well as reality-based programming. The Company employs experienced producers responsible for the development and production in each of these varied programming formats. The Company's staff is supplemented on a project basis by industry professionals utilized to expand the Company's own production resources. Annual, Recurring and Other Specials. The Company is a leading television producer of award specials, which are a significant part of the Company's television production business and contribute and provide an ongoing foundation of consistent revenue each fiscal year. Many of the Company's award specials have enjoyed sustained growth, and certain of its specials have been produced by the Company for as many as 24 years. The Company's award specials during fiscal 1997 included The 24th Annual American Music Awards (ABC), the Company's most enduring award special and again was rated number one in its time period; The 54th Annual Golden Globe Awards (NBC), the Company's fifteenth annual production for the Hollywood Foreign Press Association, acknowledging excellence in television and motion pictures; The 12th Annual Soap Opera Awards (NBC), produced for the tenth consecutive year; The 32nd Annual Academy of Country Music Awards (NBC), another popular, long running awards production; "The Family Film Awards" (2 hours-CBS), hosted by Beau Bridges, Anna Chlumsky and Joey Lawrence, was a new award shows honoring film and television productions for their family-oriented content; "The Primetime Emmy Awards" (3 hours-ABC) was hosted by Paul Reiser and received its highest ratings since 1986; and The 24th Annual Daytime Emmy Awards (NBC), the fifth year of production of this special presented by the National Academy of Television Arts & Sciences. The Company has agreements for several recurring and annual specials subject to long-term license agreements which expire between 1997 and 2000. In addition to producing award specials for television, the Company develops new concepts for television specials. Two important aspects of the Company's production of specials are that the specials may serve as pilots for the development of series programming and that specials may be produced on an annual or recurring basis. For instance, the Bloopers programs evolved from an entertainment special to a series and is still in production as television specials for NBC. The Company produced the following entertainment specials in fiscal 1997: "Dick Clark's New Year's Rockin' Eve(R) '97" (ABC), which was the Company's 25th year of production; three "Bloopers specials" entitled "All New, All-Star TV Censored Show Me the Bloopers," (NBC), "All New, All-Star TV Tickle Me Censored Bloopers," (NBC) and "All New, New All-Star TV Censored Bloopers Palooza," (NBC); and, It's Hot in Here! (UPN), a Fall Preview Special for the new Paramont Broadcast Network. In addition to the production of new programming, the Company markets material from previously produced programs for new development projects. Programs such as The American Music Awards 20th Anniversary Special, and The Golden Globes 50th Anniversary Celebration produced and delivered in fiscal 1994 for NBC, utilized footage from previous programs. Series. The Company is actively developing programs and ideas for potential series production and represents the most important area of development in terms of potential revenue and profit growth for the Company. Series programming presents many opportunities for long-term commitments and, in some cases, rerun potential. Fiscal 1997 saw these series underway. The initial six episodes of a new primetime, one-hour dramatic anthology series called "Beyond Belief: Fact or Fiction" were produced for the Fox Broadcasting Company. James Brolin hosted the series which began broadcasting in May 1997. The episodes were rebroadcast beginning in August 1997. This series, if successful, could be a significant contributor to the revenue and profit of the Company. Production continued for TNN's "Prime Time County," a live 60-minute, weeknight, country music entertainment and variety series, which premiered in January 1996. The show originates from The Nashville Network Studio in Opryland USA. The Company has received a renewal commitment to produce the show through September 1998. 5 Forty episodes of "No Relation" have been produced and delivered, the first original game show series for the fX cable network. A total of 50 additional episodes of the series "VH1's Best of American Bandstand" with new introductions were delivered for the 1997 season, bringing the total number of episodes airing on VH1 to 100 episodes. A three-year license agreement with the Family Channel was entered into to rerun 118 half-hour episodes of "TV Bloopers and Practical Jokes" series originally broadcast on NBC. This agreement is in addition to the 22 episodes of "Bloopers" programming licensed to the Family Channel in fiscal 1996. CBS committed to 13 episodes - a full season's order - for a new Saturday morning half-hour comedy show for children called "The Weird Al Show." Featuring "Weird Al" Yankovic, the series began airing in September 1997 for the 1997-98 children's television season. The Company is deficit financing a portion of the production cost in anticipation of the potential success of the series. The Company also has been retained to executive produce a talk show pilot featuring Donny and Marie Osmond. The series is being marketed for distribution by Columbia Tristar Television Distribution for the Fall 1998 season. After the end of the fiscal year, we received a commitment for Buena Vista Television to develop a talk show pilot featuring Jackie Guerra. The show will be marketed for possible distribution in calendar 1998. Movies. Television movies are continually under development and can be an important source of profitability and cash flow over the life of their distribution. In fiscal 1997, we produced a Movie-of-the-Week for CBS, "Deep Family Secrets," starring Richard Crenna and Angie Dickinson. "Country Angel," an independently financed move-for-television, is in development and tentatively scheduled to start filming in fiscal 1998. "Alien Abduction," a two-hour taped drama for the Paramount Broadcast Network (UPN), is scheduled to start production in fiscal 1998. By working with major studios that can provide financing, the Company also develops theatrical film projects on a limited basis. The Company is currently developing a motion picture utilizing the American Bandstand concept with Jersey Films for theatrical release by Universal Pictures. "Tenth Justice," is in development as a feature film for Fox 2000, based on the New York Times best seller. Live Shows - ---------- "American Bandstand" has been licensed for use as a theme name and logo for live stage shows. In fiscal 1997, we entered into a three-year license agreement for a new live show produced by Opryland Productions, Inc. at its Opryland USA Theme Park, a family-oriented entertainment facility in Nashville. We continue to license the "American Bandstand" trademark for use in a live show at Harvey's hotel and casino at Lake Tahoe, Nevada. Media Archives and Home Video - ----------------------------- The Company believes that it owns one of the largest collections of musical performance footage, including 16mm films that have been enhanced and transferred to video tape. The Company keeps an updated, computerized index of available material in order to be able to easily access the performance footage. The Company also occasionally acquires from others the rights to license classic performances by popular recording artists. These rights are acquired from the copyright holders and then licensed for television, film, cable and home video. Although the Company's archives are used as source material for the Company's productions, the Company actively licenses footage from its archives to third parties as well. In fiscal 1997, the Company licensed footage from its library to: MTV's "Legends" series, Oprah Winfrey Show, Rosie O'Donnell Show, ABC News 20/20, NBC "Dateline," A&E's "Biography," Lifetime's "Intimate Portrait," Access Hollywood and E! The Company also uses its media archives to produce programs intended directly for the home video market. The Company's previously produced home videos include The Rock & Roll Collection: Dick Clark's Golden Greats, a compilation of episodes from the series of the same name; Best of Bandstand Volumes I & II, a collection of clips from the American Bandstand series; Elvis, The Movie; and several other television movies from the Company's library. These home video releases are distributed by various independent distribution companies. 6 In fiscal 1997, a special direct-to-home video was produced called "Kid Talk 2000," which will be distributed by MVP Entertainment in fiscal 1998. Other Businesses - ---------------- dick clark corporate productions, inc. The Company's wholly-owned subsidiary, dick clark corporate productions, inc., specializes in development and execution of non-traditional marketing communications programs, corporate meetings and special events, new product introductions, trade shows and exhibits, event marketing, film, video and leisure attractions. During fiscal 1996, dick clark corporate productions evolved from primarily an events producer to include innovative marketing and business communications services for major corporations. In fiscal 1997, dccp's strategy is to provide its clients the benefit of a range of talents and production resources available to the television production business - offering a distinct, new level of creativity, production quality and expertise to this market. This access, together with the Company's budgetary controls, provides higher entertainment quality at an efficient cost. Using the entertainment resources of the Company, dccp is able to provide solutions to businesses seeking alternatives to the traditional forms of communication to reach their intended audiences. During fiscal 1997, dccp produced and delivered the following: The 50th Anniversary Celebration of Tektronix, Inc. - An open-air, live event which entertained 7,000 employees and featured company exhibits and a dynamic performance by the legendary Smokey Robinson; The Nissan Z-car Tribute - This event marked the end of an era which paid tribute to the final Z-car with an exhibit and commemoration ceremony at the Petersen Automotive Museum in Los Angeles. The American Honda Motor Co. Motorcycle Division Dealer Meeting - A production for the National Dealer Meeting in Nashville, Tennessee, which capitalized on the Company's expertise and strong ties in the country music market; The Boeing Next Generation 737 Launch - The newly designed Boeing 737 series was introduced to the world by converting a working airplane hangar into the world's largest museum. More than 41,000 guests attended the event during a single day in Renton, Washington; The Boeing Paris Air Show Exhibit - A complete redesign project based on the impressive results that were achieved by the Company on both the 737 and 777 launches; ITT Sheraton 1st Global Marketing and Sales Summit - An International summit for ITT Sheraton, which included the design of a custom set, coaching for senior executives, and break-out sessions; Kodak Professional Division Launch Meeting - After a period of downsizing and consolidation, Kodak hired the Company to a project which launched a new Professional Division, this included the complete project from theme development, all speech writing and video production to environmental design; The Mazda Auto Show Film - To attract visitors to Mazda's Auto Show booth and convey its overall brand premise, the Company developed a panoramic film experience, projected on a 12' x 40' screen with surround sound. The Company tapped into its Hollywood connections to bring award-winning talent to the film, which traveled to auto shows nationwide; Caruso Affiliated Holdings Promenade at Westlake Opening - To celebrate the opening of this unique open-air mall, the Company created a private event with a special appearance by Steve Allen, a live 30-piece orchestra, a laser show, fireworks display and dinner for 1,000 guests; Sony Business and Professional Group National Sales and Management Meeting - An event in Florida with Sony to help focus the attendees on goals and objectives for the year, get them prepared for a new wave of digital products, motivate them and recognize their achievements. Record business. In fiscal 1994, the Company established the CLICK Records(R) Inc. ("CLICK") label. During fiscal 1996, the Company entered into an agreement with Castle Communications (U.S.), Inc. for worldwide distribution of CLICK's recordings. Under the terms of the Company's agreement, the Company is not responsible for financing the production or distribution costs of CLICK's recordings. The strategy for the label involves enlisting the talent of popular recording artists of the '60s, '70s and '80s to perform classic as well as contemporary songs by varied composers and groups, resulting in recordings with wide appeal. During fiscal 1997, we completed a CD of The Spinners, called "The Spinners at Their Best". In 1997, however, Castle Communications filed for bankruptcy and as such we are reassessing our options with respect to production and distribution. A second CD which was in production featuring The Association, and a planned third CD with Little Anthony and the Imperials have been put on hold pending the Company's decision with respect to CLICK Records. The Company collaborated with HarperCollins, which published an oversized illustrated book tracing "American Bandstand" and its impact on the American scene musically and culturally over four decades. 7 DESCRIPTION OF BUSINESS RESTAURANT OPERATIONS --------------------- Introduction - ------------ The Company's restaurant operations are conducted by dick clark restaurants, inc. ("dcri"), a wholly-owned subsidiary of the Company, and dcri's wholly-owned subsidiaries. The restaurant operations include food and beverage service as well as music, dancing and merchandising activities. Capitalizing on the popularity of the American Bandstand television show and over 40 years of contemporary music, "Dick Clark's American Bandstand Grill" ("Grill") entertainment theme restaurants are an extension of the Company's entertainment business. Elements of the theme include: the "Great American Food Experience(R)", a unique menu concept featuring a variety of delicious regional specialties from around the country; a design featuring a one-of-a-kind entertainment atmosphere based on the American Bandstand television show and the music industry over the last four decades; a dance club area within the restaurant with a state-of-the-art audio-visual entertainment system; and signature "American Bandstand Grill" merchandise for customers to purchase. Each "Dick Clark's American Bandstand Grill" also features memorabilia and other items generally associated with rock n' roll and the Company's activities throughout the years, including vintage photos, gold and platinum albums, original stage costumes, concert programs, rock stars' musical instruments and rare posters. Currently, the Company has operations in eight locations: Overland Park, Kansas, a suburb of Kansas City, which opened in August 1992; Indianapolis, Indiana and Columbus, Ohio, which opened in April/May 1994; Cincinnati, Ohio, which opened in March 1996; St Louis, Missouri, which opened in November 1996; Austin, Texas, which opened in May 1997; King of Prussia, Pennsylvania, which opened in June 1997; and a dance-club-only variation of the concept in Reno, Nevada which opened in August 1993. The Company is developing additional locations which could open in the second half of fiscal 1998. dcri and Harmon Entertainment Corporation, a New Jersey corporation ("Harmon"), were originally partners in Entertainment Restaurants, a New York partnership (the "Partnership"), which was created to own, operate and manage "Dick Clark's American Bandstand Grill" restaurants and which developed the first restaurant in Miami, Florida. The Partnership purchased Harmon's interest in the Partnership in the spring of 1990, whereupon dcri became the sole owner of all of the assets of the Partnership. The Overland Park, Kansas restaurant was the Company's first owned and operated "Dick Clark's American Bandstand Grill" restaurant. The Company agreed to reimburse Harmon for capital expenditures made in connection with the Miami restaurant and to pay Harmon a royalty over time of 1.5% of gross revenues from restaurant operations, up to an aggregate of $10,000,000, for its interest in the Partnership. The Company has satisfied in full this obligation by an advance payment of $1,000,000 in the spring of 1990 and a final payment of $3,128,000 in December 1994. The entire $4,128,000 is being amortized by the Company at the rate of 1.5% of revenues. dcri has numerous memorabilia displayed in its restaurants and such memorabilia are an integral part of the restaurant's theme. Some of the memorabilia is owned by Olive and loaned to dcri without charge. In fiscal 1995, dcri began acquiring certain memorabilia for its own use and has invested $356,000 to date for current and future grills. Operations - ---------- Significant resources are devoted to ensure that "Dick Clark's American Bandstand Grill" restaurants offer the highest quality food and service. Through its managerial personnel, the Company standardizes specifications for the preparation and service of its food, the maintenance and repair of its premises and the appearance and conduct of its employees. Operating specifications and procedures are documented in a series of manuals. Emphasis is placed on ensuring that quality ingredients are delivered to the restaurants, continuously developing and improving restaurant food production systems, and ensuring that all employees are dedicated to delivering consistently high-quality food and service. The primary commodities purchased by the "Dick Clark's American Bandstand Grill" restaurants are beef, poultry, seafood and produce. The Company monitors the current and future prices and availability of the primary commodities purchased by the Company to minimize the impact of fluctuations in price and availability and to make advance purchases of commodities when considered to be advantageous. However, purchasing remains subject to price fluctuations in certain commodities, particularly produce. All essential food and beverage products are available, or upon short notice can be made available, from alternative qualified suppliers. 8 The Company maintains centralized financial and accounting controls for "Dick Clark's American Bandstand Grill" restaurants, which it believes are important in analyzing profit margins. The restaurants utilize a computerized POS system which provides point-of-sale transaction data and accumulation of pertinent marketing information. Sales data are collected and analyzed on a daily basis by management. Locations. The success of any restaurant depends, to a large extent, on its location. The site selection process for the Company's restaurants consists of three main phases: strategic planning, site identification and detailed site review. The strategic planning phase ensures that restaurants are located in population areas with demographics that support the entertainment concept. In the site identification phase, the major trade areas within a market area are analyzed and a potential site is identified. The final and most time-consuming phase is the detailed site review. In this phase, the site's demographics, traffic and pedestrian counts, visibility, building constraints, and competition are studied in detail. A detailed budget and return-on-investment analysis are also completed. Senior management inspects and approves each restaurant site prior to its lease, acquisition or construction. Six of the Company's first eight locations average 10,000 square feet in size. The Company is developing alternate configurations and sizes which increase the flexibility in choosing locations and expands the potential of the restaurant group. As an example, the new Grill opened in Austin, Texas, is an 8,500 square-foot unit that is designed with a dance club area which will accommodate full dining during lunch and early dinner hours when not in use as a dance club. In addition, the Grill opened in St. Louis is a 7,600 square foot unit. This is the Company's first restaurant-only unit without a dance floor - a potential prototype for another version of the Grill. The smaller and varied restaurant formats that we have developed should make a greater number of locations available for future consideration, expanding the overall potential of the restaurant group. In particular, smaller units should provide increased opportunities for growth as the investment in individual restaurants will be less and the site alternatives will be more numerous. The Company is also planning to test future Grills of approximately 6,500 - 7,000 square feet without a dance club area. These smaller units may provide increased profitability relative to their investment costs and should make the search for prime locations easier. Accordingly, many more locations with the right market and demographic mix will be available for consideration, including locations in malls where appropriate. Intended as a market test, the Company, through a joint venture, opened a dance-club only variation of the "Dick Clark's American Bandstand Grill" in the legendary Harold's Club in Reno, Nevada. Although the concept has been profitable, the Company has chosen to focus its expansion efforts on restaurants, which the Company believes have a broader market appeal and greater potential for future revenue growth. GENERAL INFORMATION ------------------- Joint Ventures - -------------- The Company from time to time enters into joint ventures with parties not otherwise affiliated with the Company whose purpose is the production of entertainment programming and other entertainment related activities associated with the Company's business. The C&C Joint Venture was organized by the Company and Freedom Productions in 1983 to develop and produce the Bloopers series. In December 1988, the Company acquired a controlling interest in the C&C Joint Venture, and the Company's share of net profits and losses in that venture is now 51%. Dick Clark's American Bandstand Club, a joint venture between Reno Entertainment, Inc., a wholly-owned subsidiary of dcri, and RLWH, Inc., was organized to own and operate a dance club version of "Dick Clark's American Bandstand Grill" in Reno, Nevada. Through its ownership in dcri, the Company owns a 51% controlling interest in this venture. Trademarks - ---------- The Company licenses from Olive the United States registered service mark American Bandstand(R) and various 9 variations thereof. This license has been extended through the end of fiscal 1997. As part of this license, the Company utilizes the service marks and trademarks American Bandstand Grill(R), Dick Clark's American Bandstand Grill(R) and AB (Stylized). The Company also owns many other trademarks and service marks, including federal registration for trademarks and service marks related to its television programming and other businesses. Certain of the Company's trademarks and service marks may be considered to be material to the Company, such as the trademarks and service marks used in connection with the Company's restaurant operations. Backlog and Deferred Revenue - ---------------------------- The Company's backlog consists of orders by networks, first-run syndicators and cable networks for television programming to be delivered for the 1997/1998 television season as well as contractual arrangements for the services of dccp. At June 30, 1997, the Company had received orders for 2 series, 10 specials, and 6 corporate production events which are expected to total $34,047,000. At June 30, 1996, the Company had received orders for 3 series, 11 specials and 3 corporate production events which were expected to total $29,425,000. At June 30, 1995, the Company had received orders for 1 series, 9 specials, and 3 corporate production events which were expected to total $39,653,000. The Company receives payment installments in advance of and during production of its television programs. These payments are included in deferred revenue in the Company's consolidated balance sheets and are recognized as revenue when the program is delivered to the licensee. At June 30, 1997, 1996 and 1995, such deferred revenue totaled $2,768,000, $726,000, and $4,097,000, respectively. Competition - ----------- Competition in the television industry is intense. The most important competitive factors include quality, variety of product and marketing. Many companies compete to obtain the literary properties, production personnel, and financing, which are essential to market acceptance of the Company's products. Competition for viewers of the Company's programs has been heightened by the proliferation of cable networks, which has resulted in the fragmentation of the viewing audience. The Company also competes for distribution and pre-sale arrangements, as well as the public's interest in, and acceptance of its programs. The Company's success is highly dependent upon such unpredictable factors as the viewing public's taste. Public taste changes, and a shift in demand could cause the Company's present programming to lose its appeal. Therefore, acceptance of future programming cannot be assured. Television and feature films compete with many other forms of entertainment and leisure time activities, some of which involve new areas of technology, including the proliferation of internet services and new media games. The Company's principal competitors in television production are the television production divisions of the major television networks, motion picture companies, which are also engaged in the television and feature film distribution business, and many independent producers. Many of the Company's principal competitors have greater financial resources and more personnel engaged in the acquisition, development, production and distribution of television programming. At present there is substantial competition in the first-run syndication marketplace, resulting in fragmentation of ratings and advertising revenues. Certain of the Company's customers and the television networks are considered competitors of the Company in that they produce programming for themselves. While the Federal Communications Commission (the "FCC") promulgated the Financial Interest and Syndication Rule (the "FinSyn Rule") in 1970 in order to restrict network ownership of programming and syndication activities, the FinSyn Rule, as later amended in 1992, expired on September 21, 1995, thereby eliminating such restrictions. As a consequence, the 40% cap on network in-house productions previously imposed in 1992 was eliminated, thereby permitting the major networks to produce and syndicate, in house, all of their primetime entertainment schedule. With the elimination of such restrictions, the major networks have increased the amount of programming they produce through their own production companies. Numerous consolidations have also occurred, further restricting the Company's ability to sell its entertainment programming. As a result of the elimination of the FinSyn Rule, the Company has encountered increased competition in the domestic and foreign syndication of future television programming, and the Company's rerun syndication revenues could be adversely impacted by such modification. In addition, there is increased competition from emerging networks, which were previously exempt from any restrictions under the FinSyn Rule. The Company believes, however, that it can continue to compete successfully in the highly-competitive market for television programming. This belief is based on management's extensive 10 experience in the industry, the Company's reputation for prompt, cost-efficient completion of production commitments and the Company's ability to attract creative talents. The restaurant industry is a highly-competitive industry that is affected by many factors including changes in the economy, changes in socio-demographic characteristics of areas in which restaurants are located, changes in customer tastes and preferences, and increases in the number of restaurants in which the Company's restaurants are located. The degree to which such factors may affect the restaurant industry, however, are not generally predictable. Competition in the restaurant industry can be divided into three main categories: fast food, casual dining, and fine dining. The casual dining segment (which includes the Company's restaurant operations) includes a much smaller number of national chains than the fast-food segment but does include many local and regional chains as well as thousands of independent operators. The fine dining segment consists primarily of small independent operations in addition to several regional chains. The market for corporate production services is large with many companies vying for market share. In fact, competition in the corporate production services segment is fierce. Most customers require bids on a competitive basis and some of the Company's competition have larger staffs and a greater global reach for information. dccp's principle competitors are other producers of corporate events and films (including Jack Morton Productions and Carabiner, Inc.), which have been in business longer and are more established. The Company believes that dccp can compete successfully in this market by utilizing the Company's experience in producing live events for television and its existing talent and business relationships. Employees - Television Production & Related Activities - ------------------------------------------------------ At June 30, 1997, the Company had approximately 100 full-time employees in connection with the Company's television production and related activities. The Company meets a substantial part of its personnel needs in this business segment by retaining directors, actors, technicians and other specialized personnel on a per production, weekly or per diem basis. Such persons frequently are members of unions or guilds and generally are retained pursuant to the rules of such organizations. The Company is a signatory to numerous collective bargaining agreements relating to various types of employees such as directors, actors, writers and musicians. The Company's union wage scales and fringe benefits follow prevailing industry standards. The Company is a party to one contract with the American Federation of Television and Radio Artists, which expires in November 1997, two contracts with the American Federation of Musicians which expired in February and May of 1992 (the Company is currently operating under the provisions of the contracts which expired and is in negotiations with this union, and expects to renew these contracts in the near future), two contracts with the Directors Guild of America, which expires in June 1999, one contract with the Writers Guild of America which expires in May 1998 and two contracts with the Screen Actors Guild, both of which expire in June 1998. The renewal of these union contracts does not depend on the Company's activities or decisions alone. If the relevant union and the industry are unable to come to new agreements on a timely basis, any resulting work stoppage could adversely affect the Company. Employees - Restaurants - ----------------------- At June 30, 1997, the Company had approximately 700 employees in its restaurant operations. Employees are paid on an hourly basis, except restaurant managers and certain senior executives involved in the restaurant operations. A majority of the employees are employed on a part-time, hourly basis to provide services necessary during peak periods of restaurant operations. The Company's restaurant operations have not experienced any significant work stoppages and believes its labor relations are good. ITEM 2. PROPERTIES. The Company leases from Olive under a triple net lease approximately 30,000 square feet of office space and equipment in two buildings located in Burbank, California, for its principal executive offices. The current annual base rent is $613,000 (payable monthly commencing January 1, 1992) and the lease expires on December 31, 2000. The lease agreement provides for rental adjustments every two years, commencing January 1, 1992, based on increases in the Consumer Price Index during the two-year period. The Company subleases approximately 10,000 square feet of space to third parties and affiliated companies on a month-to-month basis. The Company believes that the subleases to affiliated companies are no less favorable to the Company than could be obtained from unaffiliated third parties on an arms-length basis. 11 The Company is also party to an Agreement with Olive, wherein Olive provides records management services, including storage, retrieval and inventory of customer records, files and other personal property. The term of the Agreement extends through September 30, 1999. The Company has entered into lease agreements with respect to numerous restaurant sites that terminate at varying dates through November 30, 2010. dcpi's subsidiary, dccp, is a lessee under a lease agreement with Chelsea Atrium Associates, a New York Partnership, for approximately 5,000 square feet for the site of the dccp office in New York, New York. In addition, dccp subleases a portion of the space to Kobin Enterprises, Ltd. That sublease has been renewed through September 30, 1998. The lease expires November 1, 1999. The current annual base rent is $85,000. This amount increases 3.5% annually. The Company believes the properties and facilities it leases are suitable and adequate for the Company's present business and operations. ITEM 3. LEGAL PROCEEDINGS. The Company is involved in certain litigation in the ordinary course of its business, none of which, in the opinion of management, is material to the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Price Range Fiscal 1997 Fiscal 1996 Fiscal 1995 ----------- ----------- ----------- High Low High Low High Low --------- --------- --------- --------- --------- -------- 1st Quarter $ 14.25 $ 11.00 $ 10.00 $ 8.25 $ 10.75 $ 8.00 2nd Quarter 12.00 10.50 10.25 9.00 10.25 7.75 3rd Quarter 12.25 10.00 13.00 8.75 10.00 7.50 4th Quarter 14.00 11.38 15.00 12.00 9.75 8.50 ITEM 6. SELECTED FINANCIAL DATA Income Statement 1997 1996 1995 1994 1993 ================================================================================ Total revenues $66,129 $73,819 $46,645 $58,296 $43,428 Gross profit 14,217 11,969 9,094 10,681 5,078 G&A expenses 4,975 4,339 4,145 4,113 3,529 Minority interest 672 351 107 507 305 Interest and other income (1,937) 1,788 1,711 1,455 1,444 Income before taxes 10,507 9,067 6,553 7,516 2,688 Provision (credit) for income taxes 3,993 3,469 2,461 2,640 (510) Net income 6,514 5,598 4,092 5,138 3,198 ================================================================================
Balance Sheet 1997 1996 1995 1994 1993 ======================================================================================================== Working capital $30,017 $29,573 $27,260 $27,136 $29,101 Program costs, net 4,615 1,741 4,306 1,474 5,745 Total assets 63,298 52,711 48,308 44,317 42,461 Stockholders' equity 50,319 43,494 37,792 33,693 28,501 Weighted average number of shares outstanding Number of shares outstanding at 8,328 8,279 8,278 8,266 8,265 year end Per share data 8,382 8,302 8,279 8,277 8,265 Net income Net book value .78 .68 .49 .62 .39 6.00 5.25 4.57 4.07 3.45 ========================================================================================================
- -------- 1 Represents the sum of cash, marketable securities and accounts receivable less accounts payable. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of the following discussion and analysis is to explain the major factors and variances between periods of the Company's results of operations. This analysis should be read in conjunction with the financial statements and the accompanying notes which begin on page 18. Introduction - ------------ A majority of the Company's revenue is derived from the production and licensing of television programming. The Company's television programming is licensed to the major television networks, cable networks, program distributors, domestic and foreign syndicators and advertisers. The Company also receives production fees from program buyers who retain ownership of the programming. In addition, the Company derives revenue from the rerun broadcast of its programs on network and cable television and in foreign markets as well as the licensing of its media and film archives to third parties for use in theatrical films and television movies, specials and commercials. The Company, on a limited basis, also develops theatrical films in association with established studios that generally provide the financing necessary for production. The Company also derives substantial revenue from its restaurant business (dick clark restaurants, inc. and its subsidiaries). This business segment contributed approximately 24%, 18 % and 29% to the Company's consolidated revenue for the fiscal years ended June 30, 1997, 1996, and 1995, respectively. General - ------- License fees for the production of television programming are generally paid to the Company pursuant to license agreements during production and upon availability and delivery of the completed program or shortly thereafter. Revenue from network and cable television license agreements is recognized for financial statement purposes upon availability and delivery of each program or episode in the case of a series. Revenue from rerun broadcast (both domestic and foreign) is recognized for each program when it becomes contractually available for broadcast. Production costs of television programs are capitalized and charged to operations on an individual program basis in the ratio that the current year's gross revenue bears to management's estimate of the total revenue for each program from all sources. Substantially all television production costs are amortized in the initial year of delivery, except for those successful television series and television movies where there is likely to be future revenue earned in domestic and foreign syndication and other markets. Successful television series and television movies can achieve substantial revenue from rerun broadcasts in both foreign and domestic markets after their initial broadcast, thereby allowing a portion of the production costs to be amortized against future revenue. Distribution costs of television programs are expensed in the period incurred. Depending upon the type of contract, revenue for dick clark corporate productions, inc. is recognized when the services are completed for a live event, when a tape or film is delivered to a customer, when services are completed pursuant to a particular phase of a contract which provides for periodic payments, or as may be otherwise provided in a particular contract. Costs of individual corporate event productions are capitalized and expensed as revenue is recognized. Liquidity and Capital Resources - ------------------------------- The Company's capital resources are more than adequate to meet its current working capital requirements. The Company had cash and marketable securities of approximately $31,754,000 as of June 30, 1997 compared to $29,872,000 as of June 30, 1996. The Company has no outstanding bank borrowings or other indebtedness for borrowed money. Marketable securities consist primarily of investments in United States Treasury Bills and Treasury Notes. The Company classifies investments in marketable securities as "held-to-maturity", and carries its investments at cost in accordance with Statement of Financial Accounting Standards No. 115. This Statement requires investments in debt and equity securities, other than debt securities classified as "held-to-maturity", to be reported at fair value. Historically, the Company has funded its investment in television program costs primarily through installment payments of license fees and minimum guaranteed license payments from program buyers. To the extent the Company 14 produces television movies and television series, the Company may be required to finance the portion of its program costs for these programs not covered by guaranteed license payments from program buyers (known in the television industry as "deficit financing"). None of the Company's television production in fiscal 1997 or 1996 required any material deficit financing by the Company. The Company does anticipate incurring deficit financing in connection with the production of a children's series to be delivered in fiscal 1998. No other programs which are currently in development are anticipated to required any material deficit financing. Net cash provided by operating activities was approximately $8.6 million, $5.8 million and $1.5 million in fiscal 1997, 1996 and 1995, respectively. Net cash used in investing activities was approximately $6.6 million, $8.2 million and $2.6 million in fiscal 1997, 1996 and 1995, respectively. The fluctuations in cash provided by operations and cash used for investing activities for those years primarily reflect changes in production activity and the construction of three "Dick Clark's American Bandstand Grill" restaurants in fiscal 1997 and one restaurant in fiscal 1996. The Company expects that the opening of additional American Bandstand Grill restaurants will be financed from available capital and/or alternative financing methods such as joint ventures and limited recourse borrowings. The Company anticipates opening additional locations in fiscal 1998 which will be funded directly by the Company without using such alternative methods. Capital requirements for the Company's corporate events and production business, dick clark corporate productions, inc., are anticipated to be immaterial to the Company's overall capital position in fiscal 1998. The Company expects that its available capital base and cash generated from operations will be more than sufficient to meet its cash requirements for the foreseeable future. Results of Operations - --------------------- Revenue - Revenue for the year ended June 30, 1997 was $66,129,000 compared to $73,819,000 for the year ended June 30, 1996 and $46,645,000 for the year ended June 30, 1995. The decrease in revenue in fiscal 1997 as compared to fiscal 1996 is primarily attributable to decreased revenue associated with the television series "Tempestt" which completed production during fiscal 1996 as well as decreased revenue associated with the Company's corporate production business. This decrease was offset in part by increased revenue associated with the opening of three additional restaurants during fiscal 1997 as well as the inclusion of revenue from an additional restaurant which was operating for only four months during fiscal 1996. The increase in revenue in fiscal 1996 as compared to fiscal 1995 was primarily attributable to the delivery of the "Tempestt" talk show series in fiscal 1996. The increase is further explained by increased revenue associated with the Company's corporate production business, an improved contract for one annual special as well as the delivery in fiscal 1996 of a movie for television which did not occur in fiscal 1995. During fiscal 1997, revenue from a recurring annual special represented approximately 14% of total revenue. During fiscal 1996, revenue from a five-day per week talk show series represented approximately 15% of total revenue and revenue recognized from a recurring annual special represented approximately 12% of total revenue. During fiscal 1995, revenue from a recurring annual special represented approximately 20% of total revenue. No other production or project accounted for more than 10% of total revenue for fiscal 1997, 1996 or 1995. Gross Profit -- Gross profit as a percentage of revenue was 21 %, 16% and 19% for fiscal 1997, 1996 and 1995, respectively. The increase in gross profit as a percentage of revenue in fiscal 1997 as compared to fiscal 1996 is primarily attributable to increased profitability of the Company's television series production activities. During fiscal 1996 the Company produced a five-day per week television talk show series which earned a small gross profit as a percentage of sales. This syndicated five-day per week talk show series was cancelled by the end of fiscal 1996 and, as a consequence, gross profit as a percentage of sales increased in fiscal 1997. The increase in gross profit as a percentage of sales is further explained by the production and delivery of a new dramatic series for Fox Broadcasting Company during fiscal 1997. The decrease in gross profit as a percentage of revenue in fiscal 1996 as compared to fiscal 1995 is primarily attributable to lower gross profit as a percentage of sales associated with the five-day per week television talk show series. Talk show series in their first year of release typically earn a small gross profit as a percentage of sales. This syndicated five-day per week talk show series was in its first year of release. The decrease in gross profit as a percentage of sales in 15 fiscal 1996 is further explained by a one time project for a customer of dick clark corporate productions, which contributed lower gross profit as a percentage of the contracted revenue due to the size and nature of the project. General & Administrative -- General and administrative expense increased in fiscal 1997 and fiscal 1996 compared to the corresponding periods in the previous fiscal years primarily as a result of increased personnel costs associated with the expansion of the restaurant business. Other -- Minority interest expense increased in fiscal 1997 compared to fiscal 1996 primarily as a result of the licensing of the rebroadcast rights to 118 episodes of the previously-produced "Super Bloopers and New Practical Jokes". Minority interest expense increased in fiscal 1996 compared to fiscal 1995 primarily as a result of the licensing of 22 episodes of the previously-produced "Super Bloopers and New Practical Jokes" shows. The C & C Joint Venture, of which the Company has a 51% interest, produced the "Super Bloopers and New Practical Jokes" television specials. The Bloopers Specials currently being produced by the Company do not include the practical joke segments and are owned 100% by the Company and there is, therefore, no minority interest expense associated with their production. General - ------- Certain statements in the foregoing Management's Discussion and Analysis (the "MD&A") are not historical facts or information and certain other statements in the MD&A are forward looking statements that involve risks and uncertainties, including, without limitation, the Company's ability to develop and sell television programming, timely completion of negotiations for new restaurant sites and the ability to construct, finance and open new restaurants and to attract new corporate productions clients, and such competitive and other business risks as from time to time may be detailed in the Company's Securities and Exchange Commission reports. 16 CONSOLIDATED BALANCE SHEETS
YEAR ENDED JUNE 30, ------------------- ASSETS 1997 1996 ---- ---- Cash and cash equivalents $ 3,322,000 $ 953,000 Marketable securities 28,432,000 28,919,000 Accounts receivable 4,221,000 4,713,000 Program costs, net 4,615,000 1,741,000 Prepaid royalty 3,128,000 3,128,000 Property, plant and equipment, net 16,711,000 11,275,000 Goodwill and other assets, net 2,869,000 1,982,000 ----------- ----------- Total assets $63,298,000 $52,711,000 ----------- ----------- LIABILITIES & STOCKHOLDERS' EQUITY Liabilities: Accounts payable $ 5,958,000 $ 5,012,000 Accrued residuals and participations 2,410,000 2,260,000 Production advances and deferred revenue 2,768,000 726,000 Current and deferred income taxes 936,000 602,000 ----------- ----------- Total liabilities 12,072,000 8,600,000 ----------- ----------- Commitments and contingencies Minority interest 907,000 617,000 Stockholders' Equity: Class A common stock, $.0l par value, 2,000,000 shares authorized 750,000 shares outstanding 7,000 7,000 Common stock, $.01 par value, 20,000,000 shares authorized 7,631,500 shares outstanding at June 30, 1997 & 76,000 76,000 7,551,500 shares outstanding at June 30, 1996 Additional paid-in capital 8,205,000 7,894,000 Retained earnings 42,031,000 35,517,000 ----------- ----------- Total stockholders' equity 50,319,000 43,494,000 ----------- ----------- Total liabilities & stockholders' equity $63,298,000 $52,711,000 ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. 17 CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, ------------------- 1997 1996 1995 ---- ---- ---- Gross revenue $ 66,129,000 $ 73,819,000 $ 46,645,000 Costs related to revenue 51,912,000 61,850,000 37,551,000 ------------ ------------ ------------ Gross profit 14,217,000 11,969,000 9,094,000 General and administrative expense 4,975,000 4,339,000 4,145,000 Minority interest expense 672,000 351,000 107,000 Interest and other income (1,937,000) (1,788,000) (1,711,000) ------------ ------------ ------------ Income before provision for income taxes 10,507,000 9,067,000 6,553,000 Provision for income taxes 3,993,000 3,469,000 2,461,000 ------------ ------------ ------------ Net income $ 6,514,000 $ 5,598,000 $ 4,092,000 ------------ ------------ ------------ Net income per share $ 0.78 $ 0.68 $ 0.49 ------------ ------------ ------------ Weighted average number of shares outstanding 8,328,000 8,279,000 8,278,000 ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements. 18 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Class A Common Additional Total Common Stock Stock Paid-in Retained Stockholders' Shares Amount Shares Amount Capital Earnings Equity - ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, June 30, 1994 750,000 $ 7,000 7,527,000 $ 76,000 $ 7,783,000 $25,827,000 $33,693,000 Net income -- -- -- -- -- 4,092,000 4,092,000 Exercise of -- -- 1,500 -- 7,000 -- 7,000 stock options - ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, June 30, 1995 750,000 7,000 7,528,500 76,000 7,790,000 29,919,000 37,792,000 Net income -- -- -- -- -- 5,598,000 5,598,000 Exercise of -- -- 23,000 -- 104,000 -- 104,000 stock options - ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, June 30, 1996 750,000 7,000 7,551,500 76,000 7,894,000 35,517,000 43,494,000 Net income -- -- -- -- -- 6,514,000 6,514,000 Exercise of -- -- 80,000 -- 311,000 -- 311,000 stock options - ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, June 30, 1997 750,000 $ 7,000 7,631,500 $ 76,000 $ 8,205,000 $42,031,000 $50,319,000 - ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. 19 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Cash flows from operating activities Net income $ 6,514,000 $ 5,598,000 $ 4,092,000 Adjustments to reconcile net income to net cash provided by operations Amortization expense 22,239,000 47,778,000 20,858,000 Depreciation expense 1,468,000 1,123,000 981,000 Investment in program costs (24,586,000) (44,952,000) (23,046,000) Minority interest, net 290,000 93,000 (441,000) Disposals of leasehold improvements & equipment 150,000 73,000 177,000 Changes in assets and liabilities Accounts receivable 492,000 (2,410,000) 1,641,000 Prepaid royalty -- -- (3,128,000) Goodwill and other assets (1,414,000) (114,000) (21,000) Accounts payable, accrued residuals and participations 1,096,000 1,725,000 (1,826,000) Production advances and deferred revenue 2,042,000 (3,371,000) 1,811,000 Current and deferred income taxes payable 334,000 254,000 431,000 ------------ ------------ ------------ Net cash provided by operations 8,625,000 5,797,000 1,529,000 ------------ ------------ ------------ Cash flows from investing activities Purchases of marketable securities (29,068,000) (17,348,000) (14,224,000) Sales of marketable securities 29,555,000 14,198,000 12,803,000 Expenditures on property, plant and equipment (7,054,000) (5,095,000) (1,154,000) ------------ ------------ ------------ Net cash used for investing activities (6,567,000) (8,245,000) (2,575,000) ------------ ------------ ------------ Cash flows from financing activities Exercise of stock options 311,000 104,000 7,000 ------------ ------------ ------------ Net cash provided by financing activities 311,000 104,000 7,000 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 2,369,000 (2,344,000) (1,039,000) Cash and cash equivalents at beginning of the year 953,000 3,297,000 4,336,000 ------------ ------------ ------------ Cash and cash equivalents at end of the year $ 3,322,000 $ 953,000 $ 3,297,000 ------------ ------------ ------------ Supplemental Disclosures of Cash Flow Information: Cash paid during the year for income taxes $ 3,664,000 $ 3,186,000 $ 2,030,000 ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements. 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------ 1 -- Basis of Financial Statement Presentation The consolidated financial statements include the accounts of dick clark productions, inc., its wholly-owned subsidiaries and majority owned joint ventures, collectively referred to as the "Company". For financial statement reporting purposes, the accounts are consolidated using historical data. All significant inter-company balances and transactions have been eliminated in consolidation. The common stock of the Company is entitled to one vote per share on all the matters submitted to a vote of stockholders, and the Class A common stock is entitled to 10 votes per share. Holders of Class A common stock are entitled to a dividend equal to 85% of any declared cash dividends on the shares of common stock. On liquidation of the Company, holders of the common stock are entitled to receive $2.00 per share before any payment is made to the holders of Class A common stock, and thereafter the holders of Class A common stock are entitled to share ratably with the holders of common stock in the net assets available for distribution. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. 2 - Summary of Significant Accounting Policies Revenue -- Revenue from television program licensing agreements is recognized when each program becomes contractually available for broadcast and delivery. Revenue earned currently which is to be received in future periods is discounted to present value using the effective interest method. Depending on the type of contract, revenue for dick clark corporate productions, inc. is recognized when services are completed for a live event or when a tape or film is delivered to a customer or when services are completed pursuant to a phase of a contract which provides for periodic payment. Revenue from restaurant operations is recognized upon provision of goods and services to customers. Revenue by significant customer as a percentage of total revenue is as follows: YEAR ENDED JUNE 30, Significant Customers 1997 1996 1995 - --------------------- ---- ---- ---- NBC entertainment 15% 13% 15% ABC entertainment 17% 13% 24% Columbia Tristar Television 0% 15% 0% The Company produces television programming in relation to several awards shows subject to long-term license agreements which expire between 1997 and 2000. While the existence of each long-term agreement enhances the future financial performance of the Company, the non-renewal of certain such agreements at their respective expiration dates could have a material adverse impact on the Company's financial performance. Program Costs -- Program costs, which include acquired rights, indirect production costs (production overhead), residuals and third-party participations, are charged to operations on an individual program basis in the ratio that the current year's revenue for each program bears to management's estimate of total ultimate revenue for the current and future years for that program from all sources. This method of accounting is commonly referred to as the individual film forecast method. For the fiscal years ended June 30, 1997, 1996 and 1995 there was $5,237,000, $4,825,000 and $3,576,000, respectively, of production overhead included within program costs. Upon distribution of acquired film rights, the Company uses the individual film forecast method set forth in SFAS No. 53 to amortize these program costs, together with the participants' share and residuals costs, based upon the ratio of revenue 21 earned in the current period to the Company's estimate of total revenue to be realized. Management periodically reviews its estimates on a program-by-program basis and, when unamortized costs exceed net realizable value for a program, that program's unamortized costs are written down to net realizable value. When estimates of total revenue indicate that a program will result in an ultimate loss, the entire loss is recognized. There were no significant write downs of program costs in the fiscal years ended June 30, 1997, 1996 and 1995. The Company periodically reviews the status of projects in develpment. If, in the opinion of the Company's management, any such projects are not planned for production, the costs and any reimbrusements and earned advances related thereto are charged to the appropriate profit and loss accounts. Substantially all production and distribution costs are amortized in the initial year of availability, except with respect to successful television series and television movies which have the capacity for significant future revenue. Accounts Receivable --Accounts receivable represent unsecured balances due from the Company's various customers and the Company is at risk to the extent such amounts become uncollectible. The Company performs credit evaluations of each of its customers and maintains allowances for potential credit losses. Such losses have generally been within management's expectations. Marketable Securities -- Marketable securities consist primarily of investments in United States Treasury Bills and Treasury Notes. The Company classifies its investments in marketable securities as "held-to-maturity ", and carries the investments at cost in accordance with Statement of Financial Accounting Standards No. 115. This statement requires investments in debt and equity securities, other than debt securities classified as "held- to-maturity", to be reported at fair value. The cost of these investments as of June 30, 1997 and 1996 was $28,432,000 and $28,919,000, respectively, and the market value as of June 30, 1997 and 1996 was $28,133,000 and $28,505,000, respectively. As of June 30, 1997, the recorded costs of marketable securities maturing in fiscal 1998, 1999, 2000, and 2001 were $17,340,000, $6,024,000, $3,561,000, and $1,507,000, respectively. Cash and Cash Equivalents - Cash equivalents consist of investments in interest bearing instruments issued by banks and other financial institutions with original maturities of 90 days or less. Such investments are stated at cost, which approximates market value. Property, Plant and Equipment - Property, plant and equipment consist of the following: As of June 30, 1997 1996 ------------ ------------ Land $ 1,993,000 $ 660,000 Buildings 4,464,000 3,112,000 Leasehold improvements 5,889,000 3,005,000 Furniture and fixtures 6,210,000 3,915,000 Production and other equipment 2,920,000 2,037,000 Construction in process 73,000 2,000,000 ------------ ------------ Total property, plant and equipment $ 21,549,000 $ 14,729,000 Accumulated depreciation (4,838,000) (3,454,000) ------------ ------------ Property, plant and equipment, net $ 16,711,000 $ 11,275,000 ============ ============ Depreciation is calculated using the straight-line method based on estimated useful lives of the applicable property or asset. Useful lives range from 3 to 30 years for buildings and leasehold improvements and 5 to 7 years for furniture and fixtures and other equipment. Smallwares, included in furniture and fixtures, of $451,000 and $326,000 at June 30,1997 and 1996, respectively, are not being depreciated. The cost of normal maintenance and repairs to properties and assets is charged to expense when incurred. Major improvements to properties and assets are capitalized and depreciated over the estimated useful life of the improvements. Goodwill and Other Assets -- Goodwill resulting from the Company's acquisition of Entertainment Restaurants (see Note 4) in fiscal 1990 is being amortized on a straight-line basis over 20 years. Other assets include capitalized organizational costs, pre-opening costs and liquor license costs. Organizational costs and pre-opening costs are being amortized over 5 years and 12 months, respectively. Organizational costs include legal and other expenses relating primarily to the Company's various restaurant locations. Pre-opening costs are limited to direct, incremental costs relating to start-up activities associated with the Company's restaurant business. Liquor license costs at June 30, 1997 and 1996 of $143,000 and $75,000, respectively, are not being amortized. Accumulated amortization of goodwill and other assets at June 30, 1997 and 1996 was $1,966,000 and $1,438,000, respectively. 22 Unclassified Balance Sheet --In accordance with the provisions of Statement of Financial Accounting Standards No. 53, the Company has elected to present an unclassified balance sheet. Joint Ventures --The Company has a controlling interest in several joint venture arrangements in which the Company's share of profits and losses exceed 50%. As a result, the assets, liabilities, revenues and expenses of such joint ventures are included in the consolidated balance sheets and statements of operations of the Company with the amounts due to others shown as minority interest. Reclassifications -- The consolidated financial statements of prior years reflect certain reclassifications to conform with classifications adopted in the current year. Net Income Per Share -- Net income per share is computed on the basis of the weighted average number of common shares outstanding each year, plus common stock equivalents related to dilutive stock options. New Accounting Pronouncements -- In February, 1997 the Financial Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings Per Share" which will be implemented by the Company in the quarter ending December 31, 1997. The new standard simplifies the computation of earnings per share (EPS) and increases comparability to international standards. Under SFAS No. 128, primary EPS is replaced by "Basic" EPS, which excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. "Diluted" EPS, which is computed similarly to fully diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In February, 1997, the FASB issued SFAS No. 129, "Disclosure of Information about Capital Structure", which is effective for the Company's fiscal year ending June 30, 1998. This statement establishes standards for disclosing information about an entity's capital structure. In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" which is effective for the Company's fiscal year ending June 30, 1999. This statement established standards for the reporting and display of comprehensive income and its components in financial statements and thereby reports a measure of all changes in equity of an enterprise that result from transactions and other economic events other than transactions with owners. In June, 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of An Enterprise and Related Information", which is effective for the Company's fiscal year ending June 30, 1999. This statement changes the requirements under which public businesses report disaggregated information. The Company will adopt these statements on their respective effective dates. Management does not anticipate the implementation of SFAS 128 to have a material impact on the computation of earnings per share. The effect of the other new accounting pronouncements has not yet been determined by Management. 3 - Program Costs The Company is engaged, as one of its principle activities, in the development and production of a wide range of television and corporate programming. Management's estimate of forecasted revenue related to released programs exceeds the unamortized costs on an individual program basis. Such forecasted revenue is subject to revision in future periods if warranted by changing conditions such as market appeal and availability of new markets. The Company currently anticipates that all of such revenue and related amortization will be recognized under the individual-film-forecast method where programs are available for broadcast in certain secondary markets in years ranging from 1997 through 2002. While management can forecast ultimate revenue based on experience and current market conditions, specific annual amortization charges to operations are not predictable because revenue recognition is dependent upon various external factors including expiration of network license agreements and availability for broadcasting in certain secondary markets. 23 Program costs associated with corporate productions are amortized as projects, or identifiable elements pursuant to a contract, are delivered. Based on management's estimates of gross revenues as of June 30, 1997, approximately 77% of the $1,592,000 of unamortized program costs applicable to released programs will be amortized during the three fiscal years ending June 30, 2000. Capitalized program costs consist of the following: As of June 30, 1997 1996 - -------------------------------------------------------------------------------- Released, since inception Movies for television $ 23,795,000 $ 19,926,000 Television programs 178,563,000 153,388,000 Corporate programs 45,556,000 37,644,000 247,914,000 210,958,000 Less: accumulated amortization (246,322,000) (210,406,000) 1,592,000 552,000 ============= ============= In process Movies for theatrical release 86,000 66,000 Television programs 1,872,000 558,000 Corporate programs 437,000 248,000 2,395,000 872,000 ============= ============= Project development costs Movies for television 511,000 241,000 Television programs 80,000 44,000 Corporate programs 37,000 32,000 628,000 317,000 ============= ============= Program costs, net $ 4,615,000 $ 1,741,000 ============= ============= 4 - Prepaid Royalty Pursuant to a redemption and settlement agreement dated June 14, 1990 (the "Redemption Agreement"), between Harmon Entertainment Corporation ("Harmon"), a previous co-venturer with the Company in its restaurant business, the Company, dick clark restaurants, inc. ("dcri") and certain other parties, the Company had an obligation to pay Harmon a royalty of up to $10,000,000 at a rate of 1.5% of all restaurant revenue of which $1,000,000 was advanced to Harmon at the time the Redemption Agreement was entered into by the parties thereto. Pursuant to a modification dated December 31, 1994 to the Redemption Agreement, the Company paid Harmon $3,128,000 as pre-payment of the remaining portion of this obligation. As part of this transaction, Harmon paid the Company $358,000 in settlement of amounts owed to the Company by Harmon pursuant to the findings of an audit conducted by the Company in connection with the Redemption Agreement. As a result of the pre-payment, the Company satisfied in full its royalty obligation to Harmon under the Redemption Agreement. Harmon also dropped a previously asserted claim that it was owed certain other amounts under the Redemption Agreement. The Company is amortizing the prepaid royalty at the rate of 1.5% of revenue after the $1,000,000 advanced to Harmon is recouped (based on revenue). 24 5 - Income Taxes The provision for income taxes consists of the following: Year ended June 30, 1997 1996 1995 ----------- ----------- ----------- Current Federal $ 3,539,000 $ 3,174,000 $ 1,147,000 State 376,000 367,000 199,000 Foreign 170,000 192,000 140,000 ----------- ----------- ----------- $ 4,085,000 $ 3,733,000 $ 1,486,000 Deferred Federal (87,000) (230,000) 883,000 State (5,000) (34,000) 92,000 (92,000) (264,000) 975,000 ----------- ----------- ----------- $ 3,993,000 $ 3,469,000 $ 2,461,000 =========== =========== =========== A reconciliation of the difference between the statutory federal tax rate and the Company's effective tax rate on a historical basis is as follows: Year ended June 30, 1997 1996 1995 - ------------------- ---- ---- ---- Statutory federal rate 34% 34% 34% State taxes, net of federal income tax benefit 4 4 3 Other -- -- 1 ---- ---- ---- Effective tax rate 38% 38% 38% ==== ==== ==== Statement of Financial Accounting Standards No. 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of current and deferred income taxes were as follows:
As of June 30, 1997 1996 ----------- ----------- Deferred tax assets Accrued residuals and participations $ 311,000 $ 247,000 Rent abatement 29,000 38,000 Pre-opening costs 214,000 146,000 Depreciation 68,000 37,000 Bonus accrual 362,000 280,000 Miscellaneous 35,000 90,000 ----------- ----------- Total deferred tax assets $ 1,019,000 $ 838,000 =========== =========== Deferred tax liabilities Difference between book and tax accounting for program costs $ (481,000) $ (150,000) Prepaid royalty (1,189,000) (1,220,000) Tax deductible goodwill (257,000) (284,000) ----------- ----------- Total deferred tax liabilities $(1,927,000) $(1,654,000) Net deferred tax liability (908,000) $ (816,000) =========== =========== Taxes (payable)/receivable (28,000) 214,000 Total current and deferred taxes payable $ (936,000) $ (602,000) =========== ===========
25 6 -- Related Party Transactions The Company is a tenant under a triple net lease (the "Burbank Lease") with Olive Enterprises, Inc. ("Olive"), a company owned by the Company's principle stockholders, covering the premises occupied by the Company in Burbank, California (see Note 7 for a summary of the terms of the Burbank Lease). The Company subleases a portion of the space covered by the Burbank Lease to Olive and to unrelated third parties on a month-to-month basis. In fiscal years 1997, 1996 and 1995 the sublease income paid by Olive was $12,000 per year. The Company believes that the terms of the Burbank Lease and sublease to Olive are no less favorable to the Company than could have been obtained from unaffiliated third parties on an arms-length basis. No significant leasehold improvements were made in fiscal years 1997 or 1996. The Company also paid Olive $156,000, $142,000 and $97,000 for storage services during the fiscal years 1997, 1996 and 1995, respectively. The Company provided management and other services to Olive and other companies owned by the Company's principle stockholders for which the Company received $150,000, $158,000, and $159,000 for the fiscal years 1997, 1996, and 1995, respectively. The Company retained the services of Dick Clark as host for certain of its television programs and other talent services during fiscal 1997, 1996 and 1995 for which the Company paid him host fees of $435,000, $735,000, and $267,000, respectively. Management believes that the fees paid by the Company are no more than it would have paid to an unaffiliated third party on an arms-length basis. The Company currently licenses the United States registered service mark "American Bandstand" and all variations thereof from Olive. The Company does not pay any license fees to Olive under these license agreements. 7 - Commitments and Contingencies The Company has entered into employment agreements with certain key employees requiring payment of annual compensation of $2,921,000, $1,829,000, $1,828,000, $1,585,000 and $1,585,000 for the years ending June 30, 1998, 1999, 2000, 2001 and 2002, respectively. Several agreements also provide for the payment by the Company of certain profit participation based upon the profits from specific programs, and/or individual subsidiaries or the Company as a consolidated entity, as provided in the applicable employment agreements. Several agreements have renewal options of up to two additional years. The Company renegotiated its Burbank Lease with Olive for the term commencing June 1, 1989 and terminat ing December 31, 2000. The Burbank Lease expense for the years ended June 30, 1997, 1996, and 1995 was $616,000, $612,000 and $601,000, respectively. The Burbank Lease provides for rent increases every two years commencing January 1, 1992 based on increases in the Consumer Price Index during the two-year period. The Company has entered into lease agreements with respect to restaurants that terminate at varying dates through December 31, 2012. 26 Total lease expense for the Company for the years ended June 30, 1997, 1996 and 1995 was $1,282,000, $1,104,000, and $1,058,000, respectively. The various operating leases to which the Company is presently subject require minimum lease payments as follows: Year ended June 30, 1998 $1,473,000 1999 1,478,000 2000 1,099,000 2001 784,000 2002 795,000 Thereafter 4,597,000 8 - Stock Options In August 1996, the Company's Board of Directors approved changes to the Company's 1987 employee stock option plan. The 1996 plan was ratified by the stockholders in November 1996. The plan provides for issuance of up to 1,000,000 shares of the Company's common stock. Options granted under the plan may be either incentive stock options or non-qualified stock options, with a maximum limit of 250,000 shares to any employee during any calendar year. The exercise price of the incentive and non-qualified stock options must be equal to at least 100 percent of the fair market value of the underlying shares as of the date of grant. During fiscal years 1997, 1996 and 1995, respectively, 18,300, 1,000, and 7,500 incentive stock options were granted to certain employees of the Company to purchase shares at prices ranging from $7.50 to $14.00. As of June 30, 1997, 174,950 of all stock options granted, vested and outstanding are exercisable at prices ranging from $3.88 to $14.00. 17,300 additional options will become exercisable between fiscal years 1998 and 2000. During fiscal 1997 and 1996, 80,000 and 23,000 options, respectively, were exercised. The dilutive effect of these stock options is not significant to the fiscal 1997, 1996 and 1995 number of shares outstanding and was, therefore, not included in the calculation of net income per share. The Company applies APB Opinion 25 and related interpretations in accounting for its stock-based compen sation plans. Accordingly, compensation expense recognized was different than what would have otherwise been recognized under the fair value based method defined in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated as follows: (thousands, except per share amounts) 1997 1996 ----- ----- Net income As reported $ 6,514 $ 5,598 Pro forma 6,484 5,575 Net income per share As reported .78 .68 Pro forma .78 .67 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1997 and 1996: dividend yield of zero percent for both years; expected volatility of 35 to 46 percent; risk-free interest rates of 6.32 to 6.57 percent and expected lives of 3.60 to 9.10 years. 27 A summary of the status of the Company's stock option plans as of June 30, 1997, 1996 and 1995, and changes during the years ending on those dates is presented below:
Options Price Range Weighted Options Available (Per Share) Average Price Outstanding For Grant ----------- ------------- ----------- --------- Balance at June 30, 1994 $ 3.88-6.50 $4.14 308,450 674,550 Granted 7.50-7.50 7.50 7,500 (7,500) Exercised 4.50-4.50 4.50 (1,500) -- Cancelled 4.50-4.50 4.50 (18,500) 18,500 Balance at June 30, 1995 3.88-7.50 4.20 295,950 685,550 Granted 9.50-9.50 9.50 1,000 (1,000) Exercised 4.50-4.50 4.50 (23,000) -- Cancelled 6.50-6.50 6.50 (20,000) 20,000 Balance at June 30, 1996 3.88-9.50 4.01 253,950 704,550 Granted 11.00-14.00 12.16 18,300 (18,300) Exercised 3.88-4.00 3.91 (80,000) -- Cancelled -- -- -- -- Balance at June 30, 1997 $3.88-14.00 $4.83 192,250 686,250
The following table summarizes information about stock options outstanding at June 30, 1997:
Options Outstanding Options Exercisable ------------------- ------------------- Number Weighted Average Number Range of Outstanding Remaining Weighted Average Exercisable Weighted Average Exercise Price At 06-30-97 Contractual Life Exercise Price At 06-30-97 Exercise Price - -------------- ----------- ---------------- -------------- ----------- -------------- $ 3.88-3.88 165,450 5.17 $ 3.88 165,450 $ 3.88 7.50-9.50 8,500 7.09 7.74 8,500 7.74 11.00-14.00 18,300 4.45 12.16 1,000 14.00 $ 3.88-14.00 192,250 5.19 $ 4.83 174,950 $ 4.12
9 -- Business Segment Information The Company's business activities consist of two business segments: entertainment operations and restaurant operations. The revenue and gross profit of each of these business segments are reported in the following table. Inter-segment revenue is insignificant. Business Segments (in thousands) Entertainment Restaurants Total 1997 $50,547 $15,582 $66,129 Revenue 13,352 865 14,217 Operating profit+ 40,529 22,769 63,298 Identifiable assets 150 1,318 1,468 Depreciation 229 6,825 7,054 Capital expenditures 1996 Revenue $60,287 $13,532 $73,819 Operating profit+ 11,295 674 11,969 Identifiable assets 35,595 17,116 52,711 Depreciation 142 981 1,123 245 4,850 5,095 Capital expenditures 1995 Revenue $33,103 $13,542 $46,645 Operating profit+ 7,962 1,132 9,094 Identifiable assets 35,616 12,692 48,308 Depreciation 157 824 981 Capital expenditures 169 985 1,154 - -------------------- + Does not include corporate overhead $3,476,000, $3,471,000, and $3,834,000 for entertainment and $1,499,000, $868,000, and $311,000 for the restaurant segment during the years 1997, 1996, and 1995, respectively. Gross profit also excludes minority interest expense and interest and other income. 28 Results of Operations by Quarter (In thousands, except per share amounts) (unaudited) 1st Quarter Net Income (ending September 30) Total Revenue Gross Profit Net Income per Share - --------------------- ------------- ------------ ---------- --------- 1996 $10,909 $1,251 $303 .04 1995 $8,384 $701 $60 .01 ------------- ------------ ---------- -------- 2nd Quarter (ending December 31) - ---------------------- 1996 $9,907 $2,031 $698 .08 1995 $18,561 $1,549 $512 .06 ------------- ------------ ---------- -------- 3rd Quarter (ending March 31) - ---------------------- 1997 $22,243 $8,532 $4,464 .54 1996 $28,113 $7,097 $4,380 .53 ------------- ------------ ---------- -------- 4th Quarter (ending June 30) - ---------------------- 1997 $23,069 $2,404 $1,049 .13 1996 $18,761 $2,622 $646 .08 ------------- ------------ ---------- -------- Market and Dividend Information Price Range Fiscal 1997 Fiscal 1996 ----------------------- ----------- High Low High Low ---- --- ---- --- 1st Quarter $14.25 $11.00 $10.00 $8.25 ------ ------ ------ ----- 2nd Quarter 12.00 10.50 10.25 9.00 3rd Quarter 12.25 10.00 13.00 8.75 4th Quarter 14.00 11.38 15.00 12.00 ------ ------ ------ ----- The Company's common stock is traded over-the-counter and is quoted on the Nasdaq National Market System (symbol DCPI). The preceding table sets forth the range of prices (which represent actual transactions) by quarters as provided by the National Association of Securities Dealers, Inc. The Company has not paid a dividend during the past two years and does not anticipate paying any dividends in fiscal 1998. 29 Report of Independent Public Accountants To the Stockholders of dick clark productions, inc.: We have audited the accompanying consolidated balance sheets of dick clark productions, inc. (a Delaware corporation) and subsidiaries as of June 30, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of dick clark productions, inc. and subsidiaries as of June 30, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Los Angeles, California August 22, 1997 30 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. dick clark productions, inc. By: /s/ Richard W. Clark Richard W. Clark Chairman and Chief Executive Officer September , 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following persons on behalf of the Registrant and in the Capacities and on the date indicated. Signature Title Date /s/ Richard W. Clark Chairman September , 1997 Richard W. Clark Chief Executive Officer and Director (Principal Executive Officer) /s/ Francis C. La Maina President, Chief Operating September , 1997 Francis C. La Maina Officer and Director /s/ Karen W. Clark Director September , 1997 Karen W. Clark /s/ Lewis Klein Director September , 1997 Lewis Klein /s/ Enrique F. Senior Director September , 1997 Enrique F. Senior /s/ Jeffrey B. Logsdon Director September , 1997 Jeffrey B. Logsdon /s/ Robert A. Chuck Director September , 1997 Robert A. Chuck /s/ Kenneth H. Ferguson Chief Financial Officer September , 1997 Kenneth H. Ferguson 31 LIST OF EXHIBITS ---------------- Number Description of Document 3.1 Certificate of Incorporation of the Registrant dated October 31, 1986 and Certificate of Correction dated November 3, 1986, (incorporated by reference to Exhibit 3.1 of the Registrant's Registration Statement No. 33-9955 on Form S-1 (the "Registration Statement"). 3.2 By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registration Statement). 4.1 Form of Warrant issued to Allen & Company Incorporated and L.F. Rothschild, Towbin, Inc. (incorporated by reference to Exhibit 4.1 of the Registration Statement). 4.2 Form of certificate for shares of the Registrant's Common Stock (incorporated by reference to Exhibit 4.2 of the Registration Statement). 9.1 Agreement dated October 31, 1986, between Richard W. Clark and Karen W. Clark with form of voting trust agreement attached (incorporated by reference to Exhibit 9.1 of the Registration Statement). 10.1 Asset Exchange Agreement dated December 15, 1986, between the Registrant and Olive Enterprises, Inc. ("Olive") (incorporated by reference to Exhibit 10.1 of the Registration Statement). 10.2 Asset Exchange Agreement dated December 15, 1986, among the Registrant and Richard W. Clark, Karen W. Clark and Francis C. La Maina (incorporated by reference to Exhibit 10.2 of the Registration Statement). 10.3 Bill of Sale and Assignment and Assumption Agreement dated October 30, 1986, between the dick clark company, inc. and dick clark radio network, inc. (incorporated by reference to Exhibit 10.3 of the Registration Statement). 10.4 License Agreement dated December 15, 1986, between the Registrant and Olive (incorporated by reference to Exhibit 10.5 of the Registration Statement). 10.5 Lease dated November 1, 1986, between the Registrant and Olive (incorporated by reference to Exhibit 10.5 of the Registration Statement). 10.6 Shareholders' Agreement dated as of December 23, 1986, among Richard W. Clark, Karen W. Clark and Francis C. La Maina (incorporated by reference to Exhibit 10.14 of the Registration Statement). 10.7 Agreement and Plan of Merger dated March 1, 1985, between the dick clark company, inc. and La Maina Enterprises, Inc. (incorporated by Registration Statement). 10.8 Lease Amendment No. 1 dated June 30, 1989, between Olive Enterprises, Inc. and the Registrant amending Lease referred to as Exhibit 10.5 (incorporated by reference to Registrant's Annual Report on Form 10-K for 1989). *10.9 Employment Agreement dated as of July 1, 1997, between the Registrant and Richard W. Clark (incorporated by reference to Registrant's Annual Report on Form 10-K for 1991). *10.10 Employment Agreement dated as of July 1, 1997, between the Registrant and Karen W. Clark (incorporated by reference to Registrants Annual Report on Form 10-K for 1994). 10.11 Joint Venture Agreement dated as of June 22, 1993, between Reno Entertainment, Inc. and RLWH, Inc (incorporated by to Registrants Annual Report on Form 10-K for 1994). 32 *10.12 Employment Agreement dated as of July 1, 1997, between the Registrant and Kenneth H. Ferguson (incorporated by reference to Registrants Annual Report on Form 10-K for 1994). *10.13 Employment Agreement dated as of July 1, 1997, between the Registrant and Francis C. La Maina. *10.14 Employment Agreement dated as of January 29, 1997, between the Registrant and William S. Simon. 10.19 1996 Employee Stock Option. *21.1 List of subsidiaries. 23.1 Accountants' consent *27.1 Financial Data Schedule - --------------------------- * Filed herewith EX-10 2 10.09 - R. CLARK EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of July 1, 1997 (this "Agreement"), between dick clark productions, inc., a Delaware corporation (the "Company"), and RICHARD W. CLARK (the "Executive"). The Executive is currently employed as the Chairman and Chief Executive Officer of the Company pursuant to an Employment Agreement dated as of July 1, 1992 (the "Existing Agreement"). The Company considers the Executive's continued employment with the Company to be crucial to the continued operations and performance of the Company. Accordingly, the Company desires to secure the continued services of, and to continue the employment of the Executive with the Company and the Executive desires to continue in the employ of the Company. Therefore, the Company shall continue to Employ the Executive on the terms, provisions and conditions set forth in this Agreement and the Executive is willing to continue such employment, upon such terms, provisions and conditions. Accordingly, the Company and the Executive hereby agree as follows: 1. Employment (a) The Company shall employ the Executive, and the Executive shall serve the Company during the term hereof, as Chairman and Chief Executive Officer of the Company, with such duties and responsibilities normally associated with those positions; and the Executive hereby accepts such employment and agrees to serve the Company as the Chairman and Chief Executive Officer of the Company. The Company may request the Executive to serve as the Chief Executive Officer of certain of its subsidiaries, and if so requested, the Executive agrees to serve as the Chief Executive Officer of those subsidiaries. The Executive shall also provide the Company with his creative and executive producer services in connection with the Company's television, video and motion picture production activities. The Executive shall devote his best efforts and the major portion of his business time to the performance of his duties under this Agreement and shall perform them faithfully, diligently and competently. The Executive shall report directly and exclusively to the Company's Board of Directors. The Executive's services shall be performed in Burbank, California (or such other location as the Executive and the Company may agree upon), subject to travel reasonably and customarily required by the Company in connection with the performance of the Executive's services hereunder. (b) Notwithstanding anything to the contrary contained in this Agreement, the Executive may devote a significant portion of his business time to other business activities, including, without limitation (i) performing (as actor, host or otherwise) on television, radio and other media, consulting (other than in connection with television, video and motion picture production in the United States); (ii) owning and managing cable television systems (including the related telephony and data transmission on such systems); (iii) authoring and writing books, magazine articles or other publications (provided that the Executive will not during the Term of this Agreement license to any third party the right to exploit any television, video or motion picture rights of such books, articles or other publications without first affording the Company the right to acquire such rights as follows: the Executive will first negotiate with the Company in good faith for a period of thirty (30) days prior to negotiating with any third parties; if an agreement with the Company does not result from such negotiations, the Executive shall be free to license such rights to third parties on terms which are no less favorable to the Executive -2- than the terms last offered by the Company during the negotiations with the Company and if the terms with the third party are less favorable to the Executive, then the Executive shall once again offer such terms to the Company on an exclusive basis for a period of twenty (20) days) in which case the Company can match such terms; (iv) making personal appearances on his own behalf and on behalf of third parties in his capacity as a celebrity; (v) making product and third party endorsements; (vi) licensing his name, voice, sobriquet, biographical material and likeness in connection with any business activities permitted by this Section 1(b); (vii) serving as an officer or director of companies a majority of whose equity is owned or controlled, directly or indirectly, by the Executive on the date of this Agreement and companies a majority of whose equity is owned by the Executive after the date of this Agreement (provided such companies do not compete with any business conducted by the Company or are companies in which the Company declined to make an investment); (viii) serving as an officer or director of other companies or entities which do not compete with the business conducted by Company; and (ix) serving as an officer or director of other companies or entities or otherwise being involved in a business whose activities or operations may be similar to a business engaged in by the Company, if the Executive becomes involved in such business only after the Executive has offered the business opportunity which is presented to him to the Company and the Company has declined such opportunity and only if the Board of Directors have determined that the Executive's involvement with any such company or business activity would not be detrimental or adverse to the interests of the Company; provided, further, that in each case the activities to be engaged in by the Executive do not materially interfere with the Executive's performance of any of his duties and obligations under this -3- Agreement. As used in this Section 1(b), the term "Company" shall include the Company and its subsidiaries. 2. Term of Employment. The term of Executive's employment by the Company under this Agreement shall commence on and as of the July 1, 1997, and, subject to earlier termination pursuant to Section 5 or 7 hereof, shall terminate on June 30, 2002 (the "Term"). Notwithstanding the foregoing, unless the Company gives written notice to the Executive prior to April 1 in any year during the Term of this Agreement that it does not intend to have the Term of this Agreement extended, the Term of this Agreement shall automatically extend for an additional year from its then current expiratory date. For purposes of this Agreement, the term "Term" shall include any extension of the then applicable Term as provided in this Section 2. An example of the operation of this Section 2 is as follows: if by April 1, 1998 the Company does not furnish a notice to the Executive that the Company does not desire the Term to be extended, then the Term shall automatically be extended until June 30, 2003. 3. Compensation (a) As full compensation for all services rendered by the Executive to the Company under this Agreement, the Company shall pay to the Executive (i) a base salary at an annual rate of $975,000, payable in equal installments (once every two weeks) in accordance with the Company's customary payroll practice for its executives, and (ii) a bonus determined in accordance with Section 3(b). (b) With respect to each fiscal year of the Company during the term of the Executive's employment under this Agreement, commencing with the fiscal year ending -4- June 30, 1998, the Company shall pay to the Executive a bonus equal to the following amounts with respect to the Pre-tax Profits of the Company, if any, during that fiscal year: If Pre-tax Profits are: Over But Not over Payment ---- ------------ ------- 0 - $ 7,000,000 0 $ 7,000,000 - $10,000,000 $380,000 + 4% of Pre-tax Profits over $7,000,000 $10,000,000 - $15,000,000 $500,000 + 3% of Pre-tax Profits over $10,000,000 $15,000,000 - $650,000 + 2% of Pre-tax Profits over $15,000,000 The bonus, if any, payable to the Executive pursuant to this Section 3(b) with respect to any fiscal year shall be paid not later than thirty (30) days after the receipt by the Company from its independent public accountants of the audited financial statements of the Company with respect to that fiscal year. Nothing herein shall alter, modify, or amend the obligation of the Company pursuant to Section 3(b) of the Existing Employment Agreement to make a payment to the Executive pursuant to said Section 3(b) for the fiscal year ended June 30, 1997, which obligation shall remain in full force and effect, notwithstanding the execution and delivery of this Agreement. (c) As used in this Agreement the term "Pre-tax Profits" of the Company for any fiscal year shall mean the net income before taxes of the Company as shown on the audited consolidated statement of profit and loss of the Company and its subsidiaries for that fiscal year, but without giving effect to accruals for the bonus, if any, payable for such fiscal year to the Executive pursuant to Section 3(b) hereof and any similar bonus payable, to Mr. Francis C. -5- La Maina for that fiscal year pursuant to Mr. La Maina's then current employment agreement with the Company. (d) If the Executive's employment is terminated prior to the end of a fiscal year by his death or by the Company as a result of his disability, the bonus payable pursuant to Section 3(b) in respect of that fiscal year, if any, shall be calculated (i) if such termination shall occur during the first quarter of the Company's fiscal year, by multiplying the amount determined pursuant to Section 3(b) for that entire fiscal year by a fraction of which the numerator is the number of days in that fiscal year prior to the date of termination and the denominator is the number of days in that fiscal year; and (ii) if such termination shall occur subsequent to the first quarter of the Company's fiscal year, as if the Executive had been employed for that entire fiscal year. If the Executive's employment is terminated prior to the end of any fiscal year for "Cause" (as hereinafter defined), no bonus shall be payable to the Executive pursuant to Section 3(b) in respect of that fiscal year. (e) For purposes of Sections 3(b) and 3(c) hereof, if the Company's fiscal year shall change (the fiscal year presently being July 1 through June 30), resulting in a fiscal year which shall be less than twelve (12) months, the bonus payable pursuant to Section 3(b) in respect of that short fiscal year shall be calculated (i) by multiplying the amount of the Pre-tax Profits determined pursuant to Section 3(c) for that entire short fiscal year by a fraction of which the numerator is twelve (12) and the denominator is the number of months in that short fiscal year; (ii) by determining the bonus in accordance with Section 3(b) based on the amount resulting from the calculations in clause (i) above; and (iii) by multiplying such bonus amount resulting -6- from the calculation in clause (ii) above by a fraction of which the numerator is the number of months in that shortened fiscal year and the denominator is twelve (12). (f) Anything in this Agreement to the contrary notwithstanding, the Executive shall not receive any additional compensation for his services as a producer or executive producer of television or other programming for or on behalf of the Company, except that the Executive shall be entitled to such additional compensation for his services as a performer on television or other programming or with respect to productions (whether live or otherwise) for or on behalf of the Company and its subsidiaries and for the licensing to the Company and its subsidiaries of his name and likeness with respect to products outside of the television, video and motion picture business and the restaurant business (including, without limitation, with respect to product merchandising, commercial tie-ins and product endorsements which may be ancillary to the business of the Company or any of its subsidiaries) as shall be agreed upon by the Executive, the Company or such subsidiary, as applicable, commensurate with fees and other compensation generally received by performers of the Executive's stature. If the Executive would otherwise be entitled to receive a payment from an affiliate of the Company or a third party of compensation for his services as a producer or an executive producer of television, video or motion picture programming, the Executive shall cause such affiliate or third party to pay such compensation directly to the Company. Nothing in this Agreement shall affect any other rights the Executive may have with respect to his services as a producer or executive producer, including, without limitation, his rights to credits. -7- 4. Fringe Benefits; Expenses (a) The Executive shall be entitled to receive all health (other than disability) and pension benefits provided by the Company to its senior executives and to all other fringe benefits provided by the Company to its executives as a group and shall also be entitled to participate in all benefit plans provided by the Company to its executives as a group. (b) The Company shall reimburse the Executive for all reasonable out-of-pocket expenses (including, without limitation, entertainment expenses) incurred by the Executive in connection with the performance of the Executive's services for the Company hereunder (it being agreed that first-class travel and accommodations are reasonable expenses), upon submission of vouchers and/or receipts by the Executive in accordance with the Company's policies and procedures. (c) The Company shall provide the Executive with the use of a Company vehicle, such vehicle to be used in connection with the performance by the Executive of his duties on behalf of the Company. (d) The Executive shall be entitled to eight (8) weeks of vacation time annually (based upon the period from July 1 through June 30), which shall be taken at times selected by the Executive which are consistent with the proper performance of the Executive's duties under this Agreement. The Executive may accrue up to two (2) weeks of unused vacation time annually. -8- 5. Disability or Death (a) If, as the result of any physical or mental disability, the Executive shall have failed or been unable to perform the Executive's duties hereunder for a period of one hundred eighty (180) consecutive days, the Company may, by notice to the Executive subsequent thereto, terminate the Executive's employment under this Agreement prior to the end of the Term, effective as of the date of the notice. If the Executive's employment is terminated pursuant to this Section 5(a), the Company shall pay to the Executive (in equal installments every two (2) weeks) (i) for the period from the date of termination through the June 30 next succeeding such date of termination, an amount equal his base salary for such period at the date of termination; (ii) for the next succeeding twelve (12) month period, an amount equal to 65% of his base salary at the date of termination; (iii) for the next succeeding twelve (12) month period, an amount equal to 60% of his base salary at the date of termination; and (iv) for the twenty-four (24) month period commencing on the date of the last payment required to be made pursuant to clauses (i), (ii) and (iii) above, an amount equal to 50% of his base salary at the date of termination. (b) The period of the Executive's employment under this Agreement shall automatically terminate upon the Executive's death. In the event of the Executive's death, the Company shall pay to the beneficiary designated in writing by the Executive to the Company (or if the Executive fails to so designate a beneficiary, to the Executive's estate), an amount at an annual rate equal to his base salary in affect on the date of the Executive's death for a period of two (2) years from the date of the Executive's death, payable in equal installments on the first day of the month next succeeding the data of death and the first day of every third month thereafter. -9- 6. Non-Competition; Confidential Information. (a) (i) During the term of the Executive's employment under this Agreement or (ii) through the current Term of this Agreement, if the Executive voluntarily terminates his employment or the Executive's employment is terminated for "Cause" (as such term is hereinafter defined), the Executive shall not, directly or indirectly, engage or be interested (as a stockholder, director, officer, agent, broker, partner, individual proprietor, lender, consultant or otherwise) in any other business or enterprise which is competitive with any of the businesses engaged in by the Company or any of its subsidiaries at the time of the termination of the Executive's employment with the Company, except that the Executive may (i) engage in the activities otherwise permitted pursuant to Section l(b) hereof, whether or not competitive with the Company or any of its subsidiaries; and (ii) hold not more than 5% of the outstanding securities of any class of any publicly held company; provided that this Section 6 shall not prohibit the Executive from holding more than 5% of the outstanding securities of any class of capital stock of the Company. (b) The Executive shall not, directly or indirectly, either during the period of the Executive's employment under this Agreement or thereafter, disclose to any person or entity (except in the regular course of the Company's business or as may be required by applicable law or subpoena), or use in competition with the Company, any information, acquired by the Executive during the Executive's employment by the Company, concerning or in any way relating to any confidential or secret aspect of the Company's business, affairs, operations, plans, prospects, strategies or condition (financial or otherwise), unless such information has become -10- known by the general public other than by reason of actions of the Executive, whether direct or indirect. (c) The Executive shall not, directly or indirectly, either during the period of the Executive's employment under this Agreement or for a period of one (1) year thereafter, solicit the services of any person who was a full-time employee of the Company (other than Ms. Karen Clark, and the Executive's executive secretary, and employees who have been employed by the Company for limited periods of time in connection with the production of particular television or motion picture programming) during the last year of the period of the Executive's employment under this Agreement. (d) The Executive acknowledges and agrees that the remedy at law (including, without limitation, a remedy calculated as money damages), for breach of his covenants under this Section 6 will be inadequate and, accordingly, in the event of any breach or threatened breach by the Executive of any of the provisions of this Section 6, the Company shall be entitled, in addition to all other rights and remedies available to the Company, whether at law, in equity or otherwise, an injunction restraining any such breach or threatened breach (without posting any bond or other security or being required to prove actual damages). 7. Termination (a) The Company shall have the right to terminate and the Executive's employment with the Company hereunder (i) for "Cause" or (ii) Without Cause. For purposes of this Agreement, the term "Cause" shall mean any material breach of the Executive's obligations under Section 6 of this Agreement which is not cured within thirty (30) days after written notice thereof to the Executive; the conviction of the Executive of a felony, gross misconduct by the -11- Executive related to the Executive's position with, or duties or obligations to, the Company, which is likely to materially and adversely affect the Company's business or financial condition, the chronic addiction of the Executive to drugs or alcohol which materially and adversely affects the Executive's performance of his duties under this Agreement; or the Executive's willful failure to perform his material duties to the Company hereunder within a reasonable period under the circumstances after written notice (specifically identifying the manner in which the Board of Directors believes that the Executive has so failed to perform his duties) from the Board of Directors of the Company to the Executive (provided such duties are consistent, in the reasonable opinion of the Executive after obtaining an opinion of counsel reasonably acceptable to the Company, with this Agreement and applicable law). (b) If the employment of the Executive hereunder is terminated for "Cause", the Company shall not be obligated to make any further payments to the Executive hereunder (other than accrued and unpaid salary and expenses to the date of termination), or continue to provide any benefit (other than benefits which have accrued pursuant to any plan or applicable law to the date or termination) to the Executive under this Agreement. If the employment of the Executive is terminated Without Cause, the Company shall pay to the Executive all of his compensation (base salary and bonuses) pursuant to Section 3 as if this Agreement had not been terminated for the greater of (x) the remainder of the then current Term and (y) three (3) years after termination, all regardless of the amount of compensation the Executive may earn or be able to earn with respect to any other employment that the Executive may obtain or be able to obtain (i.e. the Executive shall have no duty to mitigate and the Company shall have no right to offset). For purposes hereof, the term "Without Cause" shall mean a -12- termination of the Executive's employment hereunder by the Company for a reason other than pursuant to Section 7(a) hereof. (c) The Executive shall have the right to terminate his employment under this Agreement upon thirty (30) days' prior notice to the Company given within sixty (60) days following the occurrence of any of the following events: (i) the Executive's title is changed so that the Executive is no longer both Chairman and Chief Executive of the Company or (ii) any action by the Company, pursuant to which the Company materially reduces the Executive's duties and responsibilities hereunder and the Executive objects thereto within thirty (30) days of any such reduction and the Company does not restore such duties and responsibilities within thirty (30) days thereafter. The Executive shall not have any rights pursuant to this Section 7(c) if the occurrence of the triggering events was the result, directly or indirectly, of a transaction in which all or substantially all of the stock or assets of the Company is sold or the Company is a party to a merger, consolidation or similar transaction, in which the Company is not the surviving entity. (d) The parties believe that payments made to the Executive based upon a termination Without Cause do not constitute "Excess Parachute Payments" under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding such belief, if any benefit is determined to be an "Excess Parachute Payment" the Company shall pay the Executive an additional amount such that (x) the excess of all Excess Parachute Payments (including any payments under this Section 7(d)) over the sun of excise tax thereon under section 4999 of the Code and income tax thereon under subtitle A of the Code and under applicable state law is equal to (y) the excess of all Excess Parachute Payments (excluding payments under this sentence) over income tax thereon under Subtitle A of the Code and under applicable state law. -13- The above determination shall be made without regard to interest and penalties for failure to pay or underpayment of taxes. 8. Name and Likeness (a) Except with respect to the outside activities of the Executive permitted pursuant to Section 1(b) hereof, the Company shall have the exclusive right during the Term of this Agreement to the commercial use in connection with its television and motion picture business of the Executive's name, reasonably approved likeness, voice, reasonably approved biography, reasonably approved photograph and reasonably approved picture; provided that any such use by the Company is not in the nature of a direct or indirect endorsement of any product, commodity or service without the Executive's prior written consent. (b) With respect to any motion picture, video, television or other programming (each a "Program") in connection with which the Executive renders services to the Company as executive producer, the Company shall accord the Executive (unless the Executive, in his sole discretion, elects not to receive such credit) screen credit on the Programs and credit in all paid advertising and publicity issued by or under the control of the Company with respect to any such Program, as executive producer of the Program, on a separate card on the screen, placement as is customary in the television and motion picture industry, and in a size no less than the size of type used to display the credit given to any other individual (other than performers) in connection with any such Program. Subject to the foregoing, the Company shall determine, in its sole discretion, the manner, form, size, style, nature and placement of any credit given to the Executive. No inadvertent failure of the Company to comply with the provisions hereof with respect to credit shall constitute a breach of this Agreement, unless the Company fails to use its -14- best efforts to cure the same, on a prospective basis only, promptly upon notice thereof. In the event of any breach of these credit provisions, the Executive's remedies, if any, shall be limited to the right to recover damages in an action at law, and in no event shall the Executive be entitled to terminate or rescind this Agreement, revoke any of the rights herein granted or to enjoin or restrain the distribution or exhibition of the Programs. 9. Miscellaneous (a) This Agreement shall be governed by and construed in accordance with the law of California applicable to agreements made and to be performed in California, and without regard to principles of conflicts of law. (b) This Agreement sets forth the entire understanding and agreement between the Company and the Executive with respect to its subject matter, supersedes all previous agreements between them relating to such subject matter (whether written or oral), all of which are merged herein (including, without limitation, the Existing Agreement). There are no representations, warranties or promises between the parties with respect to the subject matter hereof, other than those set forth herein. (c) Any notice or other communication under this Agreement shall be in writing and shall be considered given when received by the party hereto who is the intended recipient and shall be delivered personally, or mailed by certified mail, return receipt requested (postage prepaid), or sent by telecopy if sent before 4:00 p.m. (California time) on a business day, to the parties at their respective addresses or facsimile numbers, as the case may be, set forth below (or at such other address, or facsimile number, as a party may specify by notice to the other party): -15- If to the Company, to it at: 3003 West Olive Avenue Burbank, California 91510-4590 Attn: President Telecopy No.: (818) 566-6690 with a copy to; Martin Eric Weisberg, Esq. Parker Chapin Flattau & Klimpl, LLP 1211 Avenue of the Americas New York, New York 10036-8735 Telecopy No.: (212) 704-6288 If to the Executive, to him at: 3003 West Olive Avenue Burbank, California 91510-4590 Telecopy No.: (818) 566-6690 with a copy to: Joel Behr, Esq. Behr and Robinson 2049 Century Park East 26th Floor Los Angeles, California 90067 Telecopy No.: (310) 556-9229 (d) The failure of a party to insist upon strict adherence to any term or provision of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or provision on any other occasion or any other term or provision of this Agreement. Any waiver shall be limited to the specific instance for which it is given executed by the party affected thereby. This Agreement may not be waived, amended, modified or altered, except by an instrument in writing duly executed by each of the Company and the Executive. -16- (e) The invalidity or unenforceability of any term or provision of this Agreement shall not affect the validity or enforceability of the remaining terms or provisions of this Agreement which shall remain in full force and effect and any such invalid or unenforceable term or provision shall be given full effect as far as is possible under applicable law. If any term or provision of this Agreement is invalid or unenforceable in one jurisdiction, it shall not affect the validity or enforceability of that term or provision in any other jurisdiction. (f) This Agreement is not assignable by either party, except that it shall inure to the benefit of and be binding upon any successor to the Company by merger or consolidation or the acquisition of all or substantially all of the Company's assets or stock; provided such successor assumes all of the duties and obligations of the Company hereunder; and this Agreement shall inure to the benefit of the heirs, estate and legal representatives of the Executive. The duties and obligations of the Executive hereunder may not be delegated. (g) Section headings are inserted herein for convenience of reference only, and shall have no substantive aspect and shall not be taken into account in connection with the interpretation or construction of this Agreement. IN WITNESS WHEREOF, the Company and the Executive have executed and delivered this Agreement as of the day and year first above written. dick clark productions, inc. By: /s/ ----------------------------------- Name: Title: /s/ Richard W. Clark ----------------------------------- Richard W. Clark -17- EX-10 3 10.10 K. CLARK EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of July 1, 1997 (this "Agreement") between dick clark productions, inc., a Delaware corporation (the "Company"), and KAREN CLARK (the "Executive"). The Company wishes to employ the Executive, and the Executive wishes to accept employment with the Company, on the terms and conditions set forth in this Agreement. It is therefore agreed as follows: 1. Employment. (a) The Company shall employ the Executive, and the Executive shall serve the Company, as Vice President-Administration of the Company, with such duties and responsibilities as the Company's Chief Executive Officer shall assign to the Executive from time to time. The Executive shall devote her best efforts and all of her business time to the performance of her duties under this Agreement and shall perform them faithfully, diligently, competently and to the best of her ability. The Executive shall report to the Chief Executive Officer of the Company. The Executive may engage in incidental activities outside the scope of her employment with the Company so long as such activities do not detract from the fulfillment of the Executive's responsibilities under this Agreement. The Executive's services shall be performed primarily in Burbank, California (or such other location as the Executive and the Company may agree upon). 2. Term of Employment The Executive's employment by the Company under this Agreement shall commence as of the date of this Agreement and, subject to earlier termination pursuant to Section 5 or 7, shall terminate on June 30, 2002 (the "Term"). Notwithstanding the foregoing, unless the Company gives written notice to the Executive prior to April 1 in any year during the Term of this Agreement that it does not intend to have the Term of this Agreement extended, the Term of this Agreement shall automatically extend for an additional year from its then current expiratory date. For purposes of this Agreement, the term "Term" shall include any extension of the then applicable Term as provided in this Section 2. An example of the operation of this Section 2 is as follows: if by April 1, 1998 the Company does not furnish a notice to the Executive that the Company does not desire the Term to be extended, then the Term shall automatically be extended until June 30, 2003. 3. Compensation. As full compensation for all services rendered by the Executive to the Company under this Agreement, the Company shall pay to the Executive a base salary at the annual rate of $85,000, payable in equal installments (once every two weeks) in accordance with the Company's customary payroll practice for its executives. 4. Fringe Benefits; Expenses. (a) The Executive shall be entitled to receive all fringe benefits provided by the Company to its executives as a group and shall also be entitled to participate in all benefit plans provided by the Company to its executives as a group. -2- (b) The Company shall reimburse the Executive for all reasonable expenses (including, without limitation, entertainment expenses) incurred by her in connection with the performance of her services and duties for the Company in accordance with this Agreement (it being agreed that first-class travel and accommodations are reasonable expenses), upon submission of vouchers and receipts in accordance with the Company's customary policies and procedures. (c) The Executive shall be entitled to eight (8) weeks vacation time annually, to be taken at times selected by her, with the reasonable concurrence of the Chief Executive Officer of the Company, which are consistent with the proper performance of her duties under this Agreement. The Executive may accrue up to two (2) weeks unused vacation time annually which may be carried forward and used during the succeeding annual period. 5. Disability or Death. If, as the result of any physical or mental disability, the Executive shall have failed or been unable to perform her duties under this Agreement for a period of 180 consecutive days, the Company may, by notice to the Executive subsequent thereto, terminate her employment under this Agreement prior to the end of the Term, effective as of the date of the notice. The Executive's employment under this Agreement shall automatically terminate upon her death. If the employment of the Executive is terminated by reason of death or disability, the Company shall not be required to make any further payment to the Executive (other than the payment of accrued and unpaid salary and unreimbursed expenses to the date of termination). -3- 6. Non-Competition; Confidential Information. (a) (i) During the term of the Executive's employment under this Agreement or (ii) through the current Term of the Agreement, if the Executive voluntarily terminates her employment or her employment is terminated by the Company for cause, the Executive shall not, directly or indirectly, engage or be interested (as a stockholder, director, officer, consultant, agent, broker, partner, individual proprietor, lender or otherwise) in any other business which is competitive with the business of the Company, except that she may hold not more than 5% of the outstanding securities of any class of any publicly held company provided that this Section 6 shall not prohibit the Executive from holding more than 5% of the outstanding shares of any class of the Company. (b) The Executive shall not, directly or indirectly, either during the Term of the Executive's employment under this Agreement or thereafter, disclose to anyone (except in the regular course of the Company's business or as may be required by applicable law or subpoena), or use in competition with the Company, any information acquired by the Executive during her employment by the Company with respect to any confidential or secret aspect of the Company's operations or affairs unless such information has become public knowledge other than by reason of actions (direct or indirect) of the Executive. (c) The Executive shall not, directly or indirectly, either during the Term of the Executive's employment under this Agreement or for a period of one (1) year thereafter, solicit the services of any person who was a full-time employee of the Company (other than employees employed for limited period of time in connection with the production -4- of particular television or motion picture programming) during the last year of the period of the Executive's employment under this Agreement. (d) The Executive acknowledges that the remedy at law (including, without limitation, a remedy calculated as money damages), for breach of her covenants under this Section 6 will be inadequate and, accordingly, in the event of any breach or threatened breach by the Executive of the provisions of this Section 6, the Company shall be entitled, in addition to all other remedies, to an injunction restraining any such breach (without posting any bond or other security or being required to prove actual damages). 7. Termination. The Company shall have the right to terminate the Executive's employment with the Company (i) for "Cause" or (ii) Without Cause. For purposes of this Agreement, the term "Cause" shall mean any material breach of the Executive's obligations under Section 6 of this Agreement which is not cured within thirty (30) days after written notice, the conviction of the Executive of a felony, gross misconduct related to the Executive's position or duties with the Company which is likely to materially and adversely affect the Company's financial position, the chronic addiction of the Executive to drugs or alcohol which materially and adversely affects the Executive's performance of her duties under this Agreement, or the Executive's willful failure to perform her material duties within a reasonable period under the circumstances after written notice (specifically identifying the manner in which the Board believes that the Executive has failed) from the Board of Directors of the Company (provided such duties are consistent, in the reasonable opinion of the Executive after obtaining an opinion of counsel, with this contract and applicable law). -5- If the employment of the Executive is terminated for Cause, the Company shall not be obligated to make any further payment to the Executive hereunder (other than accrued and unpaid salary and unreimbursed expenses to the date of termination), or continue to provide any benefit (other than benefits which have accrued pursuant to any plan or by law) to the Executive under this Agreement. If the employment of the Executive is terminated Without Cause, the Company shall pay to the Executive all of her compensation pursuant to Section 3 as if this Agreement had not been terminated, regardless of the amount of compensation the Executive may earn with respect to any other employment she may obtain. 8. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the law of California applicable to agreements made and to be performed in California, without regard to principles of conflicts of law. (b) This Agreement contains a complete statement of all the arrangements between the Company and the Executive with respect to its subject matter, supersedes all previous agreements among them relating to its subject matter (whether written or oral) and cannot be modified, amended or terminated, except by an instrument in writing executed by the Company and the Executive. (c) Any notice or other communication under this Agreement shall be in writing and shall be considered given when received and shall be delivered personally or mailed by certified mail, return receipt requested, to the parties at their respective addresses set forth below (or at such other address as a party may specify by notice to the other): -6- If to the Company, to it at: 3003 West Olive Avenue Burbank, California 91505-4590 Attn: Chairman of the Board and Chief Executive Officer with a copy to: Martin Eric Weisberg, Esq. Parker Chapin Flattau & Klimpl, LLP 1211 Avenue of the Americas New York, New York 10036 If to the Executive, to her at: 3003 West Olive Avenue Burbank, California 91505-4590 (d) The failure of a party to insist upon strict adherence to any term or provision of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term or provision of this Agreement. Any waiver must be in writing and duly executed by the party granting any such waiver. (e) The invalidity or unenforceability of any term or provision of this Agreement shall not affect the validity or enforceability of the remaining terms or provisions of this Agreement which shall remain in full force and effect and any such invalid or unenforceable term or provision shall be given full effect as far as possible. If any term or provision of this Agreement is invalid or unenforceable in one jurisdiction, it shall not affect the validity or enforceability of that term or provision in any other jurisdiction. (f) This Agreement is not assignable by either party except that it shall inure to the benefit of and be binding upon any successor to the Company by merger or -7- consolidation or the acquisition of all or substantially all of the Company's assets, and shall inure to the benefit of the estate, heirs and legal representatives of the Executive. dick clark productions, inc. By: --------------------------------- Name: Title: /s/ Karen Clark --------------------------------- Karen Clark -8- EX-10 4 10.12 K. FERGUSON EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of July 1, 1997, (as from time to time amended, this "Agreement") between dick clark productions, inc., a Delaware corporation (the "Company"), and Mr. Kenneth H. Ferguson (the "Executive"). The Executive is currently the Vice President-Finance and Chief Financial Officer of the Company and has served in that capacity pursuant to an Employment Agreement dated as of July 1, 1994 (the "Prior Agreement"). The Company intends to continue the Executive's employment with the Company subject to the terms, provisions and conditions set forth in this Agreement. Therefore, upon the mutual premises set forth herein, and other consideration, the Company and the Executive hereby agree as follows: 1. Employment. (a) The Company hereby employs the Executive for the Term (as hereinafter defined) of this Agreement, subject to earlier termination as hereinafter provided, and the Executive hereby accepts such employment as herein provided and agrees to serve the Company, as its Vice President - Chief Financial Officer, with such duties and responsibilities as are normally associated with those positions and such other duties as may from time to time be assigned to the Executive by the President and Chief Operating Officer of the Company or the Board of Directors of the Company. The Executive shall devote his best efforts and substantially all of his business time to the performance of his duties and obligations under this Agreement and shall perform them faithfully, diligently, competently and to the best of his ability. The Executive shall report directly to the President and Chief Operating Officer of the Company. (b) The Executive shall not, directly or indirectly, engage in any outside activities, whether or not during regular business hours, if such activities would detract from the performance of his duties and obligations hereunder. Notwithstanding anything to the contrary contained in the immediately preceding sentence, the Executive may devote a portion of his business time to serving as an officer of companies a majority of whose equity is owned by Mr. Richard W. Clark on the date of this Agreement and companies a majority of whose equity is owned by Mr. Richard W. Clark after the date of this Agreement (collectively, the "Clark Affiliates") and to Mr. Clark directly; provided however, that providing services to the Clark Affiliates or Mr. Clark's directly does not compete with any business or activity conducted by the Company (unless such activities were presented to the Company and the Board of Directors of the Company determined not to engage in such activities); and provided further, that such activities do not materially interfere with the Executive's performance of his duties and obligations under this Agreement. 2. Term of Employment. The Executive's employment by the Company pursuant to this Agreement shall commence as of the date of this Agreement and, subject to earlier termination pursuant to Section 5 or 7 hereof, shall terminate on June 30, 1998 (the "Term"). 3. Compensation. (a) As full compensation for all services rendered by the Executive to the Company under this Agreement, the Company shall pay to the Executive (i) a base salary at an annual rate of $152,761, payable in equal installments (once every two weeks or as otherwise is consistent with the Company's regular payroll practices) in accordance with the Company's customary payroll practices for its senior executives, and (ii) subject to the discretionary nature thereof, a bonus determined in accordance with Section 3(b) hereof. The Company shall be entitled to make and deduct from any amounts payable to the Executive hereunder all withholdings for federal, state and local taxes and any other withholdings that are required pursuant to applicable law or regulation or are otherwise consistent with the Company's practices for its senior executives. -2- (b) The Company may, in its sole and absolute discretion, pay an annual bonus to the Executive for the completed fiscal year of the Company ending June 30, 1998. The bonus shall be based upon such criteria as the President of the Company and Chief Operating Officer, in his discretion, considers appropriate. The Executive acknowledges that no representation or warranty has been made by the Company or any of the members of the Board of Directors of the Company that any bonus will be paid to the Executive pursuant to this Agreement to the Executive. 4. Fringe Benefits; Expenses, etc. (a) The Executive shall be entitled to receive all health and pension benefits provided by the Company to its senior executives as a group and shall also be entitled to participate in all other benefit plans provided by the Company to its senior executives as a group. (b) The Company shall reimburse the Executive for all reasonable, necessary and ordinary out-of-pocket expenses incurred by him in connection with the performance of his services for the Company pursuant to this Agreement; provided, however, that each such reimbursement shall be upon submission of vouchers and receipts in accordance with the Company's customary policies and procedures from time to time in effect. (c) The Executive shall be entitled to four (4) weeks vacation time annually, to be taken at times selected by him, subject to the concurrence of the President and Chief Operating Officer of the Company, which are consistent with the proper performance of the Executive's duties under this Agreement. One week of vacation shall accrue for each quarter of employment during the Term. 5. Disability or Death. (a) If, as the result of any physical or mental disability, the Executive shall have failed or been unable to perform his duties for a period of one hundred twenty (120) -3- consecutive days or greater than one hundred eighty (180) days during the twelve (12) month period of the Term, the Company may, by notice to the Executive subsequent thereto, terminate the Executive's employment under this Agreement, effective as of the date of the notice, and the Company shall not be required to make any further payment or to furnish any benefit to the Executive under this Agreement (other than accrued and unpaid base salary pursuant to Section 3(a) hereof and expenses pursuant to Section 4(b) hereof and the benefits which have accrued pursuant to any plan pursuant to Section 4(a) hereof or by applicable law). (b) The Executive's employment under this Agreement shall automatically terminate upon his death and the Company shall not be required to make any further payment or the furnish any benefit to the Executive under this Agreement (other than accrued and unpaid salary pursuant to Section 3(a) hereof and expenses pursuant to Section 4(b) hereof and benefits which have accrued pursuant to any plan pursuant to Section 4(a) hereof or by applicable law). 6. Non-Competition; Confidential Agreement. (a) During the period of the Executive's employment under this Agreement, the Executive shall not, directly or indirectly, engage or be interested (as a stockholder, director, officer, agent, broker, partner, individual proprietor, joint venturer, lender or otherwise), individually or in any representative capacity, in any other business which is competitive with any business conducted by or contemplated to be conducted by the Company or any Clark Affiliate, except that the Executive may own not more than 5% of the outstanding securities of any class of any publicly held company. (b) The Executive shall not, directly or indirectly, either during the term of the Executive's employment under this Agreement or thereafter, disclose to any person or entity (except in the regular course of the Company's business during the period of the Executive's employment hereunder or as required by applicable law), or use in competition with the Company or any Clark Affiliate, any information of any nature whatsoever acquired by the Executive during -4- his employment by the Company or during the period that the Executive provides services to such Clark Affiliate, with respect to any confidential, secret, non-public or proprietary aspect of the Company's or such Clark Affiliate's operations, business affairs, financial condition, customers, clients, trade secrets, business strategies or plans or other confidential information, unless such information has become known to the general public, other than by reason of any action (direct or indirect) on the part of the Executive. (c) The Executive shall not, directly or indirectly, either during the term of the Executive's employment under this Agreement or for a period of one (1) year thereafter, solicit the services of any person who was a full-time employee of the Company or any Clark Affiliate (other than employees employed for limited periods of time in connection with the production of particular television or motion picture programming and the Executive's executive assistant) during the last twelve (12) months of the period of the Executive's employment with the Company. (d) The Executive acknowledges that the remedy at law for breach of any of his covenants or obligations under this Section 6 will be inadequate and, accordingly, in the event of any breach or threatened breach by the Executive of the provision of this Section 6, the Company shall be entitled, in addition to all other rights and remedies to obtain an injunctive or other equitable relief restraining any such breach or threatened breach (without posting any bond or other security and without the necessity of demonstrating actual damages). The equitable remedies described in this Section 6(d) shall not be the exclusive remedy available to the Company and shall be cumulative with all other rights and remedies available to the Company at law, in equity or otherwise. 7. Termination. (a) The Company shall have the right to terminate the Executive's employment with the Company (i) "for cause" or (ii) "without cause". For purposes of this Agreement, termination "for cause" shall mean termination of the Executive's employment based -5- upon (i) any material breach of the Executive's covenants or obligations under Section 6 of this Agreement which is not cured within thirty (30) days after written notice to the Executive by the Company; (ii) conviction of an act of fraud or theft or gross malfeasance on the part of the Executive, including, without limitation, conduct of a felonious or criminal nature, embezzlement or misappropriation of assets; (iii) the chronic addiction of the Executive to drugs or alcohol; (iv) violation by the Executive of his duties or obligations to the Company or any Clark Affiliate, including, without limitation, conduct which is inconsistent with the Executive's position and which results or is reasonably likely to result (in the opinion of the President and Chief Operating Officer of the Company) in an adverse effect (financial or otherwise) on the business of the Company or any Clark Affiliate, as the case may be, and such violation is not cured within fifteen (15) days after written notice to the Executive by the Company; (v) the Executive's failure, refusal or neglect to perform his duties hereunder within a reasonable period, under the circumstances, after written notice from the Board of Directors or the President and Chief Operating Officer of the Company (specifically identifying the manner in which the Board of Directors or the President and Chief Operating Officer of the Company believes that the Executive has failed, refused or neglected his duties. A termination of the Executive's employment with the Company for any reason other than those enumerated in the immediately preceding sentence or as provided in Section 5 hereof shall be, for purposes of this Agreement, deemed to be a termination of the Executive's employment with the Company "without cause". If the employment of the Executive is terminated "for cause", the Company shall not be obligated to make any further payment to the Executive (other than accrued and unpaid base salary pursuant to Section 3(a) hereof and expenses pursuant to Section 4(b) hereof incurred prior to the date of termination), or continue to provide any benefit (other the benefits which have accrued under any plan pursuant to Section 4(a) hereof or by applicable law) to the Executive under this Agreement prior to the date of termination. (b) If the employment of the Executive is terminated "without cause", the Company shall pay to the Executive all of his base salary pursuant to Section 3(a) hereof for the remainder of the term of this Agreement, as if the employment of the Executive hereunder had not been terminated regardless of the amount of compensation the Executive may earn or be able -6- to earn with respect to any other employment (subject to Section 6(a) hereof) he may obtain or be able to obtain (i.e. the Executive shall have no duty to mitigate and the Company shall have no right to offset), but the Company shall not be obligated to continue to provide any other benefit (other than the benefits under any plan pursuant to Section 4(a) hereof through June 30, 1998, unless such benefits are available to the Executive in connection with other employment obtained by the Executive) to the Executive under this Agreement which case the Company shall have no further obligation to provide such benefits. (c) If the Executive's employment is terminated prior to the end of the Term, to the extent permitted by applicable law, the Company shall be entitled to deduct any amounts owing to the Company by the Executive from the amounts payable to the Executive. 8. Miscellaneous. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN CALIFORNIA. THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED WITHOUT ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED. (b) This Agreement contains a complete statement of all the agreements and understandings between the Company and the Executive with respect to its subject matter, supersedes all previous and contemporaneous agreements and understandings among them relating such subject matter (whether written or oral) including, without limitation, the Prior Agreement, all of which are mereged herein. This Agreement cannot be modified, amended or terminated orally and may only be modified or amended by an instrument in writing signed by each of the parties hereto. There are no representations, warranties or promises between the parties with respect to the subject matter hereof, except as expressly set forth herein. -7- (c) Any notice or other communication under or relating to this Agreement shall be in writing and shall be considered given when received by the intended recipient and shall be delivered personally or mailed by certified mail, return receipt requested or by an overnight courier service, to the parties at their respective addresses set forth below (or at such other address as a party may specify by notice to the other): If to the Company, to it at: 3003 West Olive Avenue Burbank, California 91505 Attn: President and Chief Operating Officer with a copy to: Parker Chapin Flattau & Klimpl, LLP 1211 Avenue of the Americas New York, New York 10036 Attn: Martin Eric Weisberg, Esq. If to the Executive to him at: 3003 West Olive Avenue Burbank, California 91505 (d) The failure of a party to insist upon strict adherence to any term or provision of this Agreement on any one occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or provision or any other term or provision of this Agreement on any other occasion. Any waiver must be in writing and signed by each of the parties. All rights and remedies of the parties hereunder are cumulative and may be exercised separately or concurrently. Any waiver of any term or provision hereof shall be effective for the specific instance in which given and it shall not be construed as a waiver of any other term or provision. (e) The invalidity or unenforceability of any term or provision of this Agreement shall not affect the validity or enforceability of the remaining terms or provisions of -8- this Agreement which shall remain in full force and effect and any such invalid or unenforceable term or provision shall be given full effect as far as possible pursuant to applicable law. If any term or provision of this Agreement is invalid or unenforceable in any one jurisdiction, it shall not affect the validity or enforceability of that term or provision in any other jurisdiction. It is the intention of the parties that this Agreement be enforced by any court of competent jurisdiction to the fullest extent permitted by applicable law and that the Agreement may be reformed and amended by a court of competent jurisdiction in connection with its enforcement. (f) This Agreement is not assignable by either party, except that it shall inure to the benefit of and be binding upon any successor to the Company by merger or consolidation or any assignee of the Company upon the acquisition of all or substantially all of the Company's assets by such assignee; provided such successor assumes all of the obligations of the Company hereunder; and this Agreement shall inure to the benefit of the heirs, estate and legal representatives of the Executive. (g) The section headings are inserted herein for convenience of reference only and shall not be taken into account in the interpretation or construction of this Agreement. dick clark productions, inc. By: /s/ ---------------------------------- Name: Title: /s/ Kenneth H. Ferguson ------------------------------------- Kenneth H. Ferguson -9- EX-10 5 10.13 - LAMAINA EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of July 1, 1997 (as it may be amended in accordance with its terms, this "Agreement") between dick clark productions, inc., a Delaware corporation (the "Company"), and Mr. Francis C. La Maina (the "Executive"). The Executive is currently the President and Chief Operating Officer of the Company and is employed pursuant to an Employment Agreement dated as of March 1, 1995 (the "Existing Employment Agreement"). The term of the Existing Employment Agreement expires on June 30, 2000. In light of the Executive's experience with the Company and his exemplary services on behalf of the Company, the Company desires to secure the services of, and continue the employment the Executive for the period ending June 30, 2002, and to do so at this time; and the Executive desires to continue in the employ of the Company through that date. Therefore, the Company shall continue to employ the Executive and the Executive shall continue his employment with the Company, upon the terms, provisions and conditions set forth herein. Accordingly, the Company and the Executive hereby agree as follows: 1. Employment. (a) The Company shall employ the Executive, and the Executive shall serve the Company during the term hereof, as President and Chief Operating Officer of the Company, with such duties and responsibilities normally associated with those positions. The Executive shall devote his best efforts and a major portion of his business time to the performance of his duties under this Agreement and shall perform them faithfully, diligently and competently. The Executive shall report only to the Chairman and Chief Executive Officer of the Company and the Board of Directors of the Company; and all other executives of the Company (other than the Chairman and Chief Executive Officer and the Vice President-Administration, so long as the position of Vice President-Administration is held by Ms. Karen Clark) shall report to the Executive. The Executive's services shall be performed in Burbank, California (or such other location as the Executive and the Company may agree upon) subject to travel reasonably and customarily required by the Company in connection with the Executive's services hereunder. (b) Notwithstanding anything to the contrary contained in this Agreement, the Executive may devote a significant portion of his business time to other business activities, including, without limitation, serving as an officer of companies a majority of whose equity is owned by Mr. Richard W. Clark ("Mr. Clark") and/or Mr. Clark and the Executive on or after the date of this Agreement; provided such companies do not compete with the business conducted by the Company and its subsidiaries ("Affiliated Companies"), providing financial and consulting services to Mr. Clark in connection with any activities that Mr. Clark is permitted to engage in accordance with his then current employment agreement with the Company and serving as a director of any Affiliated Company; provided, that engaging in such activities do not materially interfere with the Executive's performance of his duties under this Agreement. 2. Term of Employment. The term of Executive's employment by the Company under this Agreement shall commence on and as of July 1, 1997 and, subject to earlier termination pursuant to Section 5 or 7 hereof, shall terminate on June 30, 2002 (the "Term"). Notwithstanding the foregoing, unless the Company gives written notice to the Executive prior to April 1 in any year during the Term of this Agreement that it does not intend to have the Term of this Agreement extended, the Term of this Agreement shall automatically extend for an additional year from its then current expiratory date. For purposes of this Agreement, the term "Term" shall include any extension of the then applicable Term as provided in this Section 2. An example of the operation of this Section 2 is as follows: if by April 1, 1998 the Company does not furnish a notice to the Executive that the Company does not desire the Term to be extended, then the Term shall automatically be extended until June 30, 2003. 3. Compensation. (a) As full compensation for all services rendered by the Executive to the Company under this Agreement, the Company shall pay to the Executive (i) a base salary at the initial annual rate of $539,379, payable in equal installments (once every two weeks) in accordance with the Company's customary payroll practice for its executives, and (ii) a bonus determined in accordance with Section 3(b) hereof. On each July 1, during the term of the Executive's employment hereunder, commencing with July 1, 1998, the base salary payable to the - 2 - Executive pursuant to Section 3(a)(i) shall be increased by an amount, if any, equal to the percentage increase in the consumer price index (the "CPI") for Los Angeles, California for the twelve (12) month period ended on the June 30, as next preceding such July 1, as published by the Federal Bureau of Labor Statistics (the "Bureau") or any successor entity to the Bureau multiplied by the then current base salary pursuant to Section 3(a)(i); provided that if the Bureau no longer publishes the CPI, then a comparable index reasonably acceptable to the Company and the Executive shall be substituted therefore. (b) With respect to each fiscal year of the Company during the term of the Executive's employment under this Agreement, commencing with the fiscal year ending on June 30, 1998, the Company shall pay to the Executive a bonus equal to the following amounts with respect to the Pre-tax Profits of the Company, if any, during that fiscal year: If Pretax Profits are: Over But Not Over Payment - ---- ------------ ------- 0 - $ 7,000,000 0 $ 7,000,000 - $10,000,000 $260,000 + 3% of Pre-tax Profits over $7,000,000 $10,000,000 - $15,000,000 $350,000 + 2% of Pre-tax Profits over $10,000,000 $15,000,000 - $450,000 + 1% of Pre-Tax Profits over $15,000,000 The bonus, if any, payable to the Executive pursuant to this Section 3(b) hereof with respect to any fiscal year shall be paid not later than fifteen (15) days after the receipt by the Company from its independent public accountants of the audited financial statements of the Company with respect to the applicable fiscal year. Nothing herein shall alter, modify, or amend the obligation of the Company pursuant to Section 3(b) of the Existing Employment Agreement to make a payment to the Executive pursuant to said Section 3(b) for the fiscal year ended June 30, 1997, which obligation shall remain in full force and effect, notwithstanding the execution and delivery of this Agreement. (c) As used in this Agreement the term "Pre-tax Profits" of the-Company during a fiscal year shall mean the income before taxes of the Company as shown on the audited - 3 - consolidated statement of profit and loss of the Company and its subsidiaries, but without giving effect to accruals for the bonus payable to the Executive for that fiscal year pursuant to Section 3(b) hereof and any similar bonus payable to Mr. Clark for that fiscal year pursuant to Mr. Clark's then current employment agreement with the Company. (d) If the Executive's employment is terminated prior to the end of a fiscal year due to his death or by the Company as a result of his disability, the bonus payable pursuant to Section 3(b) hereof in respect of that fiscal year shall be calculated (i) if such termination shall occur during the first quarter of the Company's fiscal year, by multiplying the amount determined pursuant to Section 3(b) for that entire fiscal year by a fraction, the numerator of which is the number of days in that fiscal year prior to the date of termination and the denominator of which is the number of days in that fiscal year; and (ii) if such termination shall occur subsequent to the first quarter of the Company's fiscal year, as if the Executive had been employed for that entire fiscal year. If the Executive's employment is terminated prior to the end of a fiscal year for "Cause" (as hereinafter defined), no bonus shall be payable to the Executive pursuant to Section 3(b) in respect of that fiscal year. (e) For purposes of Sections 3(b) and 3(c) hereof, if the Company's fiscal year shall change (the fiscal year presently being July 1 through June 30), resulting in a fiscal year which shall be less than twelve (12) months, the bonus payable pursuant to Section 3(b) in respect of that short fiscal year shall be calculated (i) by multiplying the amount of the Pre-tax Profits determined pursuant to Section 3(c) for that entire short fiscal year by a fraction of which the numerator is twelve (12) and the denominator is the number of months in that short fiscal year; (ii) by determining the bonus in accordance with Section 3(b) based on the amount resulting from the calculations in clause (i) above; and (iii) by multiplying such bonus amount resulting from the calculation in clause (ii) above by a fraction of which the numerator is the number of months in that shortened fiscal year and the denominator is twelve (12). 4. Fringe Benefits; Expenses. (a) The Executive shall be entitled to receive all health (other than disability) and pension benefits provided by the Company to any of its executives and to all other fringe benefits provided by the Company to its executives as a group and shall also be entitled to - 4 - participate in all benefit plans provided by the Company to its executives as a group. The Executive shall also be entitled to a term life insurance policy, naming such beneficiaries as the Executive shall specify from time to time, in an amount equal to $3,000,000. (b) The Company shall reimburse the Executive for all reasonable expenses (including, without limitation, entertainment expenses) incurred by the Executive in connection with the performance of his services for the Company (it being agreed that first-class travel and accommodations are reasonable expenses), upon submission of receipts and/or vouchers in accordance with the Company's customary policy. (c) The Executive shall be entitled to six (6) weeks vacation time annually, to be taken at times selected by him, with the reasonable concurrence of the Chief Executive Officer of the Company, which are consistent with the proper performance of the Executive's duties under this Agreement. The Executive may accrue up to two (2) weeks unused vacation time annually. 5. Disability or Death. (a) If, as the result of any physical or mental disability, the Executive shall have failed or been unable to perform his duties to the Company hereunder for a period of one hundred eighty (180) consecutive days, the Company may, by notice to the Executive subsequent thereto, terminate the Executive's employment under this Agreement prior to the end of the Term, effective as of the date of the notice. If the Executive's employment is terminated pursuant to this Section 5(a), the Company shall pay to the Executive (in equal installments every two (2) weeks) (i) for the period from the date of termination through the June 30 next succeeding such date of termination, an amount equal to his base salary for such period at the date of termination; (ii) for the next succeeding twelve (12) month period, an amount equal to 80% of his base salary at the date of termination; (iii) for the next succeeding twelve (12) month period, an amount equal to 60% of his base salary at the date of termination; and (iv) for the twenty-four (24) month period commencing on the date of the last payment required to be made pursuant to clauses (i), (ii) and (iii) above, an amount equal to 50% of his base salary at the date of termination. (b) The period of the Executive's employment under this Agreement shall automatically terminate prior to the end of the Term upon his death. In the event of such termination upon death, the Company shall pay to the beneficiary or beneficiaries of the Executive - 5 - as designated in writing by the Executive to the Company (or if the Executive fails to so designate a beneficiary, to his estate), an amount at an annual rate equal to his base salary in effect on the date of his death for a period of two (2) years from the date of his death, payable in equal installments on the first day of the month next succeeding the date of death and the first day of every third month thereafter. 6. Non-Competition; Confidential Information. (a) (i) During the period of the Executive's employment under this Agreement or (ii) through the end of the then current Term of this Agreement, if the Executive voluntarily terminates his employment (other than because of a Change of Control (as such term is defined in Section 8 hereof) or a termination by the Executive in accordance with Section 7(c) hereof) or if the Executive's employment is terminated by the Company for Cause (as such term is hereinafter defined) as provided for hereunder, the Executive shall not, directly or indirectly, engage or be interested (as a stockholder, director, officer, agent, broker, partner, individual proprietor, lender or otherwise) in any other business which is competitive with the business of the Company and its subsidiaries, except that the Executive may (i) engage in the activities otherwise permitted pursuant to Section l(b) hereof, whether or not competitive with the Company or any of its subsidiaries and (ii) hold not more than 5% of the outstanding securities of any class of any publicly held company; provided that this Section 6 shall not prohibit the Executive from holding more than 5% of the outstanding securities of any class of capital stock of the Company. (b) The Executive shall not, directly or indirectly, either during the period of the Executive's employment under this Agreement or thereafter, disclose to anyone (except in the regular course of the Company's business or as required by applicable law or subpoena), or use in competition with the Company, any information acquired by the Executive during his employment by the Company with respect to any confidential or secret aspect of the Company's operations, business, affairs, plans, prospects, strategies or condition (financial or otherwise) unless such information has become public knowledge other than by reason of actions (direct or indirect) of the Executive. (c) The Executive shall not, directly or indirectly, either during the period of the Executive's employment under this Agreement or for a period of one (1) year thereafter, - 6 - solicit the services of any person who was a full-time employee of the Company (other than employees employed for limited periods of time in connection with the production of particular television or motion picture programming) during the last year of the term of the Executive's employment under this Agreement. (d) The Executive acknowledges that the remedy at law (including, without limitation, a remedy calculated as monetary damages) for breach of his covenants under this Section 6 will be inadequate and, accordingly, in the event of any breach or threatened breach by the Executive of the provisions of this Section 6, the Company shall be entitled, in addition to all other remedies, whether at law, in equity or otherwise, to an injunction and/or other appropriate equitable relief restraining any such breach (without posting any bond or other security or being required to prove actual damages). 7. Termination. (a) The Company shall have the right to terminate and the Executive's employment with the Company under this Agreement (i) for Cause or (ii) Without Cause. For purposes of this Agreement, the term "Cause, shall mean any material breach of the Executive's obligations under Section 6 of this Agreement which is not cured within thirty (30) days after written notice of any such breach is furnished to the Executive, the conviction of the Executive of a felony, gross misconduct related to the Executive's position or duties with the Company which is likely to materially adversely affect the Company's financial condition, the chronic addiction of the Executive to drugs or alcohol which materially adversely affects the Executive's performance of his duties under this Agreement, or the Executive's willful failure to perform his material duties within a reasonable period under the circumstances after written notice (specifically identifying the manner in which the Board of Directors believes that the Executive has failed) from the Board of Directors of the Company; (provided that such duties are consistent, in the reasonable opinion of the Executive after obtaining an opinion of counsel, with this Agreement and applicable law. (b) If the employment of the Executive is terminated for Cause, the Company shall not be obligated to make any further payment to the Executive (other than accrued and unpaid salary and expenses to the date of termination), or continue to provide any benefit (other than benefits which have accrued pursuant to any plan or by applicable law) to the Executive - 7 - under this Agreement. If the employment of the Executive is terminated Without Cause, then (except as otherwise provided in the Section 11 hereof) the Company shall pay to the Executive, in equal monthly installments, all of his compensation (base salary and bonuses) pursuant to Section 3 hereof as if this Agreement had not been terminated for the greater of (x) the remainder of the then current Term and (y) three (3) years after termination, all regardless of the amount of compensation the Executive may earn or be able to earn with respect to any other employment that the Executive may obtain or be able to obtain (i.e. the Executive shall have no duty to mitigate and the Company shall have no right to offset). For purposes hereof, the term "Without Cause" shall mean a termination of the Executive's employment hereunder for a reason other than pursuant to Section 7(a) hereof. (c) The Executive shall have the right to terminate his employment with the Company under this Agreement prior to the end of the Term, upon thirty (30) days' prior notice to the Company given within sixty (60) days following the occurrence of any of the following events: (i) the Executive is not retained as President and Chief Operating Officer of the Company even if the Executive is allowed to continue in the employ of the Company, or (ii) the Company materially reduces the Executive's duties and responsibilities hereunder and the Executive objects within thirty (30) days of any such reduction and the Company does not restore such duties and responsibilities within forty-five (45) days thereafter. Without limiting the provisions of Section 8 hereof, the Executive's duties and responsibilities shall not be deemed materially reduced for purposes hereof solely by virtue of the fact that the Company is (or substantially all of its assets are) sold to, or is combined with, another entity; provided that the Executive shall continue to have the same duties and responsibilities with respect to the Company's business following such sale or combination. If this Agreement is terminated by the Executive as set forth in this Section 7(c), such termination shall be deemed to be a termination by the Company Without Cause, with the same effect as - 8 - otherwise provided in this Agreement. 8. Change of Control. Notwithstanding anything in this Agreement to the contrary (but without limiting Section 11 hereof), if the Executive shall voluntarily terminate his employment with the Company within one hundred twenty (120) days after a Change of Control (as such term is hereinafter defined), the Company shall pay to the Executive an amount at an annual rate (payable in equal monthly installments) equal to his base salary in effect on the date of termination of employment for a period from the date of such termination and ending three (3) years thereafter, regardless of the amount of compensation the Executive may earn or be able to earn with respect to any other employment that the Executive may obtain (i.e., the Executive shall have not duty to mitigate and the Company shall have no duty to mitigate. For purposes of this Agreement the term "Change of Control" shall mean Mr. Clark and/or the Executive not controlling, either through direct or beneficial ownership or by contract or otherwise, in the aggregate, shares of capital stock of the Company sufficient to elect a majority of the Board of Directors of the Company, unless the reason that neither Mr. Clark and/or the Executive is unable to control such number of shares is due to the sale of stock by the Company to the public during such periods of time when Mr. Clark and/or the Executive are serving in their present positions with the Company. 9. "Piggyback" Registration. Unless the Executive's employment with the Company is terminated for Cause prior to June 30, 2000, if at any time the Company proposes to file a registration statement under the Securities Act of 1933, as amended (the "Act") on Form S-1, Form S-2 or Form S-3 (or any successors to those Forms) covering an offering of the Company's Common Stock by the Company in which any of its shareholders participates, it shall include in the registration statement such number of the Executive's shares of the Company's Common Stock as the Executive may designate in his request. If any registration of which the Executive is given notice pursuant to the preceding sentence shall be, in whole or in part, in connection with an underwritten offering of the Company's Common Stock, any request by the Executive pursuant to this Section 9 to register the distribution of the Executive's shares of the Company's Common Stock may, but need not, specify that those shares are to be included in the underwriting on the same terms and conditions as the shares of the Company's Common Stock, if any, otherwise being - 9 - sold through underwriters. However, if the managing underwriter or underwriters determine and advise the Company in writing that the inclusion in the registration of all or a portion of the Executive's shares of the Company's Common Stock would interfere with the successful marketing of the other shares of the Company's Common Stock being sold, the Company shall not be obligated to include the Executive's shares which would interfere with the successful marketing of the other shares being sold; provided, that the Executive's shares are excluded pro rata with the shares of the other shareholders whose shares are to be included in the registration. If there is an underwritten offering of the shares of the Company's Common Stock and the Executive has the opportunity but does not sell his shares of Common Stock to the underwriter or underwriters, the Executive shall not sell those shares (i) during the period of distribution of the shares of the Company's Common Stock by the underwriter or underwriters and (ii) during any further period that participants in the offering agree not to sell their shares of the Company's Common Stock at the request of the underwriter or underwriters. Notwithstanding the foregoing, the Company shall not be obligated to include the Executive's shares of Common Stock in a registration statement if, the sale of the Executive's shares of Common Stock would be exempt from the registration requirements of the Act and, if requested, the Company has delivered to the Executive an opinion of counsel to the Company that such Common Stock is so exempting connection with any registration of all or a portion of the Executive's shares of the Company's Common Stock as contemplated by this Section 9, the Executive shall pay such of the expenses of such registration as the other shareholders included in such registration, in the proportion that the Executive's shares subject to the registration bear to the total number of shares of all shareholders whose shares are subject to the registration. The Company shall indemnify the Executive and his heirs, estate and personal representatives and hold each of them harmless against any damage, loss, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) arising out of any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated in any registration statement or prospectus relating to the distribution of the Executive's shares of the Company's Common Stock, except to the extent the damage, loss, cost or expense arises out of a statement or omission that was based upon - 10 - information furnished in writing to the Company by the Executive for use in the registration statement or prospectus. The Executive shall indemnify the Company, its directors, officers, employees, agents and affiliates and their respective successors and assigns and hold each of them harmless against any damage, loss, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) arising out of any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated in any registration statement or prospectus relating to the distribution of his shares of the Company's Common Stock to the extent the damage, loss, cost or expense arises out of a statement or omission that was based upon information furnished in writing to the Company by the Executive for use in the registration statement or prospectus. Promptly after receipt by an indemnified party of notice of the commencement of any action, suit or other proceeding for which such indemnified party is entitled to indemnification hereunder, the indemnified party shall notify the indemnifying party of the commencement of any such action, suit or other proceeding. Failure to give such a notice shall not affect any liability the indemnifying party may have to the indemnified party otherwise than under this paragraph, except to the extent that the failure to notify shall have a material adverse affect on the indemnifying party's ability to defend the action, suit or other proceeding. The indemnifying party may participate in the action or may assume the defense of the action, with counsel reasonably satisfactory to the indemnified party. After giving notice of such an assumption of the defense, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense other than the reasonable costs of investigation. Unless the indemnifying party shall fail to assume the defense of an action for which the indemnifying party is obligated to provide indemnification hereunder, the indemnified party shall not settle any claim or action without the consent of the indemnifying party. 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the law of California applicable to agreements made and to be performed in California, and without regard to its principles of conflicts of law. (b) This Agreement sets forth the entire understanding and agreement between - 11 - the Company and the Executive with respect to its subject matter, supersedes all previous agreements between them relating to such subject matter (whether written or oral), all of which are merged herein (including, without limitation, the Existing Agreement). Notwithstanding the immediately preceding sentence, it is the intention of the Executive and the Company that nothing in this Agreement affect the options granted to the Executive by the Existing Employment Agreement under the Company's Stock Option Plan. There are no representations, warranties or promises between the parties with respect to the subject matter hereof, other than those set forth herein. (c) Any notice or other communication under or relating to this Agreement shall be in writing and shall be considered given when actually received by the intended recipient and shall be delivered personally or mailed by certified mail, return receipt requested (postage paid), or by telecopy if sent before 4:00 p.m. (California time) on a business day, to the parties at their respective addresses or facsimile numbers, as the case may be, set forth below (or at such other address, or facsimile number, as a party may specify by notice to the other): If to the Company, to it at: 3003 West Olive Avenue Burbank, California 91505-4590 Attn: Chairman Fax No.: (818) 566-6690 With a copy to: Martin Eric Weisberg, Esq. Parker Chapin Flattau & Klimpl, LLP 1211 Avenue of the Americas New York, New York 10036-8735 Fax No.: (212) 704-6288 If to the Executive, to him at: 3003 West Olive Avenue Burbank, California 91505-4590 Fax No.: (818) 566-6690 - 12 - with a copy to: Eric B. Woldenberg, Esq. Pryor Cashman Sherman & Flynn 410 Park Avenue New York, New York 10022 Fax No.: (212) 326-0806 (d) The failure of a party to insist upon strict adherence to any term or provision of this Agreement on any one occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or provision on any other occasion or any other term or provision of this Agreement. Any waiver shall be limited to the specific instance for which it is given. This Agreement may not be waived, amended, modified or altered, except by an instrument in writing duly executed by each of the Company and the Executive. (e) The invalidity or unenforceability of any term or provision of this Agreement shall not affect the validity or enforceability of the remaining terms or provisions of this Agreement which shall remain in full force and effect and any such invalid or unenforceable term or provision shall be given full effect as is far as possible under applicable law. If any term or provision of this agreement is invalid or unenforceable in any one jurisdiction, it shall not affect the validity or enforceability of that term or provision in any other jurisdiction. (f) This Agreement is not assignable by either party, except that it shall inure to the benefit of and be binding upon any person or entity which is a successor to the Company by merger or consolidation or which acquires all or substantially all of the Company's assets; provided such successor assumes all of the obligations of the Company; and the Agreement shall inure to the benefit of the heirs, estate and legal representatives of the Executive. 11. No Parachute Payments. Notwithstanding anything in this Agreement to the contrary, if, at any time after the date hereof, the Company obtains a written opinion of tax counsel to the Company ("Tax Counsel") to the effect that there exists a substantial likelihood that any payment to which the Executive would (but for the application of this Section 11) be entitled under this Agreement would (but for such application) then be treated as an excess - 13 - parachute payment (as such term is defined in Section 280G of the internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder), then this Agreement shall be amended by adjusting the amounts, timing and manner of determination of the payments to which the Executive is entitled hereunder to the extent and in the manner necessary so that, in the opinion of Tax Counsel, there does not exist a substantial likelihood that any payment that the Executive is entitled to under this Agreement (as so amended) will be treated as an excess parachute payment, and otherwise in an equitable fashion. 12. Headings. Section headings are inserted herein for convenience of reference only, shall have no substantive aspect and shall not be taken into account in connection with the interpretation or construction of this Agreement. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first above written. dick clark productions, inc. By: /s/ Richard W. Clark --------------------------- Name: Richard W. Clark Title:Chairman and Chief Executive Officer /s/ Francis C. La Maina --------------------------- Francis C. La Maina - 14 - EX-10 6 10.14 R. SIMON EMPLOYMENT AGREEMENT Effective as of January 29, 1997 William Stuart Simon 1254 South Saltair Avenue, Apt. 202 Los Angeles, CA 90025 Dear Bill: This letter agreement sets forth the new terms, provisions and conditions of your employment with dick clark productions, inc., a Delaware corporation (the "Company"). Those terms, provisions and conditions are as follows: 1. Term of Agreement. The term of this agreement shall commence on January 29, 1997 and shall expire on January 29, 2000 unless earlier terminated pursuant to the provisions hereof. 2. Title. From January 29, 1997, your title and position shall be Treasurer of the Company. From and after January 29, 1998, you shall also be Vice President of Finance of the Company. In any case, your services shall be full time and shall be exclusive to the Company. 3. Reporting Responsibility. You shall report directly to the Company's Chief Financial Officer. You shall also have reporting responsibility to the Company's President and such other individuals as may be designated from time to time by the Company's President. 4. Salary. As full consideration for your services hereunder, you shall be entitled to receive a salary at an annual rate as set forth below: 1/29/97 - 1/28/98: $80,000.00 1/29/98 - 1/28/99: $90,000.00 1/29/99 - 1/29/00: $100,000.00 which shall be paid to you, subject to applicable withholdings and deductions, bi-weekly in accordance with the Company's policies. 5. Discretionary Bonus. The Company may consider paying you a bonus with respect to an any complete fiscal year (July 1 - June 30) during which you provided services to the Company of under this agreement. The awarding of any such bonus shall be determined by the Company in its sole and absolute discretion, there being no obligation on the part of the Company to pay any bonus or any representation, warranty, agreement or guaranty that any such bonus will be awarded. In evaluating whether or not to award any bonus and the amount of any bonus awarded, the Company shall consider your performance as an employee, the results and financial performance of the Company for such fiscal year, and such other criteria and factors as the Company, in its sole and absolute discretion, considers appropriate. You further acknowledge and agree that in entering into this agreement, you are not relying on the fact that you will receive a bonus from the Company. 6. Benefits. During the term of this agreement, you shall remain entitled to participate in such health, medical, 401 K and other benefit plans as are available to all the employees of the Company as a group. Your participation in such plans shall be subject to the terms and provisions of such plans including, without limitation, any waiting periods, eligibility standards and contribution requirements as may be in effect from time to time. 7. Vacation. You shall remain entitled to three (3) weeks of vacation annually, which shall accrue in accordance with applicable law. You shall coordinate the timing of your vacation periods with those officers of the Company to whom you report. The Company expects you to fully utilize your vacation time and the Company shall not compensate you for any accrued vacation time in excess of the Company's limits. 8. Travel. All airline travel for business purposes by you on behalf of the Company shall be business class on all transcontinental flights within the United States and all international flights. All other airline travel shall be coach class. All other reasonable out-of-pocket expenses associated with any required and necessary business travel, such as lodging, meals and ground transportation, shall be reimbursed in accordance with the Company's policies and practices with respect thereto, as from time to time in effect. 9. Options. For each year of this agreement, the Company shall grant to you an option (collectively, the "Options") to purchase up to 2,000 shares of the Company's common stock, $0.01 par value per share (the "Common Stock"), such grant to be effective upon your acceptance, execution and delivery of this agreement. The Options shall have a per share exercise price equal to the market value of a share of Common Stock on January 30, 1997 (which is $11.00 per share) and shall vest and be exercisable as to up to 2,000 shares of Common Stock on the first, second and third anniversaries, respectively, of the effective date of this agreement. Any portion of any of the Options which is unexercised as of the earlier of (a) the fifth anniversary of the effective date of this agreement or (b) 30 days following any termination of your employment with the Company, shall automatically terminate, whether or not vested. In addition to the foregoing, the Options shall be subject to the terms and provisions of the Company's 1987 Employee Stock Option Plan and the certificates which evidence the Options. 10. Signing Bonus. Within five (5) days after your execution and delivery of this agreement, the Company shall pay you a one-time signing bonus of $5,000.00. 11. Termination. Your employment and this agreement may be terminated by the Company immediately (a) should there be a material breach by you of any of your obligations or duties to the Company; (b) should you engage in an act of moral turpitude or commit a criminal or other act of a felonious nature; or (c) should you fail to perform your duties in a reasonable and competent manner as determined by the Chief Financial Officer or the President of the Company. 12. Confidentiality and Non-solicitation. You shall keep all aspects of the business of the Company of which you become aware strictly confidential, including, without limitation, financial information, concepts, revenues, pricing, business strategies, methods of conducting business and contractual arrangements with third parties and agree not to use or disclose any -2- such information to any third party without the Company's prior written consent, which consent may be withheld by the Company in its sole and absolute discretion. Notwithstanding the foregoing, you may disclose any information pursuant to applicable subpoena or law; provided that prior to making such disclosure, you shall give the Company prior written notice of the intended disclosure to the extent possible, so that the Company, if it determines to do so, may seek a protective order with respect to such disclosure. You shall not for the twelve (12) month period following termination of your employment with the Company for any reason whatsoever, hire or solicit for employment any employee of the Company who was an employee of the Company during the last six (6) months of your employment with the Company. The Company shall be entitled to seek injunctive and other equitable relief with respect to any breach or threatened breach of your obligations pursuant to this paragraph. The provisions of this paragraph shall survive the expiration or earlier termination of this agreement. 13. Work for Hire. (a) All of your services to the Company in connection with this agreement are being specially ordered or commissioned by Company and Company shall be the owner and proprietor of all material created by you hereunder and all of the results and proceeds of your services in connection with herewith. Any material created by you, and the results and proceeds of your services, shall constitute a "work made for hire" within the meaning of the Copyright Act and shall be referred to hereafter as "Materials". Company shall own in perpetuity all rights of whatever kind and character, throughout the world and in any and all languages, in and to the Materials, including without limitation all material, themes, ideas, operations, products, titles, compositions, designs, patterns, props, costumes, concepts, characters, creations, sets, works, writings, business, dialogue, and all other matter written, suggested, composed, created, prepared, submitted, or interpolated by you for or in connection with your services hereunder. In the event it is determined by law that any or all of the Materials were not created as a work-for-hire, you shall be deemed to have assigned to Company all rights, title and interest in and to the subject Materials for no further consideration except as expressly set forth herein. (b) Company shall have the right, but not the obligation, to use, adapt, change, revise, delete from, add to or rearrange the Materials, or any part of the Materials, and to combine the Materials with other works or materials of you or of others, and to vend, copy, publish, reproduce, record, transmit, broadcast by radio and/or television, perform, photograph with or without sound, including spoken words, dialogue and music synchronously recorded, and to communicate the same by any means now known or hereafter devised, either publicly and for profit, or otherwise. You waive throughout the world the benefit of any law, doctrine or principle known as the "moral rights of authors" or any similar law, doctrine or principle however named. (c) You shall, at Company's request, sign, acknowledge and deliver to Company all documents and instruments (collectively, "Document") which Company may from time to time reasonably deem necessary or desirable to evidence, establish, maintain, protect, enforce or defend its rights under this Agreement. If you fail to do so within seven (7) business days after written request by the Company, then Company is hereby irrevocably appointed as your -3- attorney-in-fact with the full right, power and authority to sign, acknowledge and deliver such Document in your name and on your behalf. 14. Governing Law. This letter agreement shall be governed by and construed in accordance with the law of the State of California, without reference to its conflicts of law principles. To the extent permitted by applicable law, this letter agreement shall not be construed or interpreted with any presumption against the party causing this letter agreement to be drafted. 15. Miscellaneous. This agreement may not be amended, modified or waived except by an instrument in writing signed by the Company and you. This agreement sets forth the entire understanding and agreement between you and the Company regarding the subject matter hereof and there are no representations, warranties, understandings, agreements or promises regarding such subject matter, except as is expressly set forth herein. Please evidence your concurrence with, and agreement to, the terms and provisions of this letter agreement by signing and returning the enclosed copy of this letter agreement. Very truly yours, /s/ Francis C. LaMaina - ------------------------------------ Francis C. LaMaina President Agreed and accepted as of January 29, 1997 /s/ William S. Simon - ------------------------------------ William S. Simon -4- EX-21 7 LIST OF SUBSIDIARIES Exhibit 21.1 dick clark productions, inc. Subsidiaries & Affiliates dick clark film group, inc. dick clark presentations, inc. dick clark media archives, inc. dick clark restaurants, inc. C & C Joint Venture dick clark corporate productions, inc. Metcalf Restaurants, Inc. Reno Entertainment, Inc. Dick Clark's American Bandstand Club Buckeye Entertainment, Inc. Hoosier Entertainment, Inc. Kenwood Entertainment King of Prussia Entertainment dick clark entertainment, inc. dick clark company - Nashville, inc. St. Ann Entertainment Austin ABG, Ltd. Austin ABG Partners, Inc. ABG Operating (Austin), Inc. Austin Concessions, Inc. Maybe Productions, Inc. Family Secret Productions, Inc. Bandstand Holdings, Inc. EX-27 8 FDS -- FISCAL YEAR ENDED JUNE 30, 1997
5 0000805370 dick clark productions, inc. YEAR JUN-30-1997 JUL-01-1996 JUN-30-1997 3,322 28,432 4,221 0 4,615 35,975 21,549 4,838 63,298 8,368 0 0 0 8,288 42,031 63,298 66,129 66,129 51,912 51,912 5,647 0 (1,937) 10,507 3,993 6,514 0 0 0 6,514 0.78 0.78
-----END PRIVACY-ENHANCED MESSAGE-----