Kushner Locke Co · 10-K/A · For 9/30/95

Filed On 1/29/96   ·   SEC File 1-10661   ·   Accession Number 912057-96-978

Amendment to Annual Report   ·   Form 10-K
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 1: 10-K/A      Amendment to Annual Report                            13     85K 

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K/A 
--------------- 

AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995        COMMISSION FILE NO. 0-17295 

THE KUSHNER-LOCKE COMPANY 
(Exact name of registrant as specified in its charter)

 CALIFORNIA                                     95-4079057
(State or other jurisdiction of                       (I.R.S. Employer      
incorporation or organization)                     Identification Number)   

11601 WILSHIRE BLVD., 21ST FLOOR, LOS ANGELES, CALIFORNIA 90025 
(Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code (310) 445-1111 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 
Not Applicable

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: 
Common Stock, without par value 
10% Convertible Subordinated Debentures, Series A due 2000
13 3/4% Convertible Subordinated Debentures, Series B due 2000
Common Stock Purchase Warrants

    The  aggregate market value  based on the closing  price of the Registrant's
Common  Stock  held  by  nonaffiliates  of  the  Registrant  was   approximately
$21,194,000 as of December 31, 1995.                                            

    There  were 35,679,607 shares of outstanding  Common Stock of the Registrant
as of December 31, 1995.                                                        

Total number of pages 13                                                        

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    The  undersigned registrant  (the "Registrant") hereby  amends the following
items of its Annual Report on Form 10-K for the fiscal year ended September  30,
1995 (the "Report") as follows:                                                 

PART III

    The  Registrant hereby deletes the information set forth under Items 10, 11,
12 and 13 of the Report and replaces  such items in their entirety as set  forth
below.                                                                          

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                        

EXECUTIVE OFFICERS AND DIRECTORS                                                

    Directors  of the Company are elected  annually by the stockholders to serve
for a term of one year or until their successors are duly elected and qualified.
Set forth below is certain information  concerning each person who is  presently
an executive officer or director of the Company.                                

                                                        · Enlarge/Download Table

                             DIRECTOR                                                             
         NAME           AGE   SINCE                             POSITION                          
----------------------  ---  -------- ------------------------------------------------------------
                                                                                                  
Peter Locke             52     1983   Co-Chairman, Co-Chief Executive Officer and President;      
                                       Director                                                   

Donald Kushner+         50     1983   Co-Chairman, Co-Chief Executive Officer and Secretary;      
                                       Director                                                   

S. James Coppersmith+   63     1995   Director                                                    

Stuart Hersch           45     1989   Director                                                    

Milton Okun+            72     1995   Director                                                    

Lenore Nelson           45     --     Chief Financial Officer, Executive Vice President and       
                                       Assistant Secretary                                        

------------------------                                                        
+   Member of Audit Committee                                                   

BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS                                  

    The business experience, principal occupations and employment of each of the
directors  and executive  officers of  the Company, for  at least  the past five
years, are as follow:                                                           

    Peter Locke co-founded the Company with Donald Kushner and currently  serves
as  Co-Chairman, Co-Chief  Executive Officer and  President of  the Company. Mr.
Locke has served  as executive producer  on substantially all  of the  Company's
programming  since  its inception.  Prior to  1983,  Mr. Locke  produced several
prime-time television programs,  including two  years of  the STOCKARD  CHANNING
SHOW  and the NBC  television mini-series THE STAR  MAKER, starring Rock Hudson.
Mr. Locke also produced two made-for-television  movies telecast on CBS and  the
films THE HILLS HAVE EYES PARTS I and II.                                       

    Donald Kushner co-founded the Company with Peter Locke in 1983 and currently
serves as Co-Chairman, Co-Chief Executive Officer and Secretary. Mr. Kushner has
served  as executive producer on substantially  all of the Company's programming
since its inception. Mr. Kushner  was the producer of  TRON, a 1982 Walt  Disney
theatrical  film  starring Jeff  Bridges, which  was  nominated for  two Academy
Awards.                                                                         

    S. James Coppersmith has served as  director of the Company since 1995.  Mr.
Coppersmith  has  been Chairman  of the  Board of  Trustees of  Emerson College,
Boston, Massachusetts, since December 1993.  Previously, he served as  President
of WCVB-TV Boston, a division of the Hearst Corporation, from 1982 to June 1994.
In  addition, Mr. Coppersmith has been a member of the Board of Governors of the
Boston Stock Exchange since January 1995. Mr. Coppersmith has been a Director of
Sun America Asset Management Corp., a division of Sun America Corp., since 1985,
of Pizzeria Uno Corp. since 1987 and of Waban Corp. since March 1994.           

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    Stuart Hersch has served as a director of the Company since August 1989. Mr.
Hersch was an  executive consultant  to the Company  on a  full-time basis  from
August  1989 through August 1990,  and on a part-time  basis from September 1990
through September  1993.  From August  1990  to  January 1996,  Mr.  Hersch  was
President  of  the WarnerVision  Entertainment division  of Atlantic  Records, a
subsidiary of  Time-Warner,  Inc. From  1988  to  August 1989,  Mr.  Hersch  was
Chairman  of Hersch Diener & Company,  an independent consulting firm. From 1983
to 1987, Mr. Hersch was the Chief Operating and Chief Financial Officer of  King
World Productions, Inc.                                                         

    Milton  Okun has served as a director of the Company since 1995. Mr. Okun is
founder and major  shareholder of Cherry  Lane Music Company,  Inc., which is  a
privately held company. Mr. Okun has held these positions since 1960.           

    Lenore  Nelson joined the Company in May  1994 and currently serves as Chief
Financial Officer,  Executive  Vice  President  and  Assistant  Secretary.  From
December  1989 to  May 1994,  Ms. Nelson  was a  Senior Vice  President with the
Entertainment Industries Group at Imperial Bank. Prior thereto, Ms. Nelson was a
Vice President of Entertainment Industries at Bank of California. Ms. Nelson has
also acted as a manager of film/television post-production services provided  to
various  entertainment companies including Columbia  Television, The Walt Disney
Company,  Warner  Brothers,  Inc.,   Paramount  Communications,  Inc.  and   NBC
Productions.                                                                    

    Directors  who are also executive officers of the Company do not receive any
additional compensation for serving as members of the Board of Directors or  any
committee  thereof. Peter Locke, Donald Kushner  and Milton Okun will receive no
compensation for  serving  as a  member  of the  Board  of Directors.  S.  James
Coppersmith  and Stuart Hersch  will receive $20,000  and $25,000, respectively,
payable quarterly for fiscal 1995 for serving on the Board of Directors and  any
committees, thereof.                                                            

    During  the  1995 fiscal  year,  there were  two  meetings of  the  Board of
Directors and no meetings of the Option Committee of the Board of Directors. All
other actions of the Board of Directors and Option Committee were taken pursuant
to unanimous written consents. There was no meeting of the Audit Committee apart
from the full  meeting of  the Board  of Directors.  Each then-current  director
attended  the meetings of the  Board of Directors and  the Option Committee held
during the period for which he has been a director or for which he has served as
an Option Committee member.                                                     

OTHER SIGNIFICANT EMPLOYEES                                                     

    Gregory Cascante,  age  46, joined  the  Company  on September  1,  1994  as
President  and Chief Executive Officer of Kushner-Locke International, Inc., the
international theatrical distribution  subsidiary of the  Company. Cascante  has
served  as  President and  Chief Executive  Officer  of August  Entertainment, a
foreign sales agency for theatrical film producers, since 1988.                 

    Patricia Clifford,  age 45,  has served  as an  Executive Producer  for  the
Company  since  January 1993.  Prior to  joining the  Company, Ms.  Clifford was
President of Interscope Communications from 1986 through January 1993.          

    Rob Dwek, age  31, has  been with  the Company  since October  1990 as  Vice
President  of Development;  as Executive  Vice President  of Development  of the
Company since January  1995; and  as President  of Television  since June  1995.
Before  joining the  Company, Mr. Dwek  was employed by  Creative Artists Agency
from  July  1989  to  October  1990  and  prior  thereto  was  with  Bob  Athens
Productions.                                                                    

    Janet  Faust, age 41,  has served as  an Executive Producer  for the Company
since March  1992. Prior  to joining  the Company,  Ms. Faust  was an  Executive
Producer  for Spectator Films from June 1989 to  March 1992 and from May 1984 to
May 1989 was employed by NBC where she supervised the development and production
of numerous made-for-television movies.                                         

    Marvinia Anderson,  age 53,  has served  as President  of KL  International,
Inc., the Company's international television distribution subsidiary, since June
1995.  Prior  to joining  the  Company, she  served  in various  executive sales
positions with World International Network,  Inc., Capital Cities/ABC and  Times
Mirror Cable.                                                                   

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    Lawrence  Mortorff, age 48, has served as  President of KL Features, Inc., a
subsidiary of the Company responsible for the production of feature films, since
October 1993.  From  April  1993 to  October  1993,  Mr. Mortorff  served  as  a
consultant  to the  Company. Mr. Mortorff  was an independent  producer of films
from 1987  through the  time prior  to joining  the Company.  Additionally,  Mr.
Mortorff  formed ISO, a company which represents films internationally, in 1989.
From 1985 to 1986, Mr. Mortorff was president of Scotti Bros. Pictures. Prior to
1985, Mr.  Mortorff  held  various  executive  positions  in  the  entertainment
industry,  including vice president of ICM, and  as an associate attorney in two
California law firms.                                                           

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934            

    Section  16(a)  of  the  Exchange  Act,  requires  executive  officers   and
directors,  and persons who beneficially  own more than 10%  of any class of the
Company's equity securities to file initial reports of ownership and reports  of
changes  in  ownership  with  the Securities  and  Exchange  Commission ("SEC").
Executive officers,  directors and  greater than  10% beneficial  owners of  any
class  of the  Company's equity  securities are  required by  SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.           

    Based solely  on a  review of  the copies  of such  forms furnished  to  the
Company   and  certain  written  representations  from  executive  officers  and
directors, the Company  believes that  each such  person has  complied with  all
Section  16(a)  filing  requirements  applicable  to  such  executive  officers,
directors and greater than 10% beneficial owners.                               

ITEM 11.  EXECUTIVE COMPENSATION                                                

CASH COMPENSATION                                                               

    The following table sets forth the cash compensation paid or accrued by  the
Company  during the fiscal year ended September  30, 1995 to the Chief Executive
Officer and  each  executive officer  of  the  Company whose  salary  and  bonus
exceeded $100,000 (the "Named Executive Officers").                             

                                                        · Enlarge/Download Table

                                                                                       LONG-TERM                     
                                                                                     COMPENSATION                    
                                                                                        AWARDS                       
                                                                      ANNUAL         -------------                   
                                                                 COMPENSATION (1)     SECURITIES                     
                                                               --------------------   UNDERLYING        ALL OTHER    
                                                     FISCAL     SALARY      BONUS    OPTIONS/SARS   COMPENSATION (2) 
           NAME AND PRINCIPAL POSITION                YEAR        ($)        ($)          (#)              ($)       
--------------------------------------------------  ---------  ---------  ---------  -------------  -----------------
                                                                                                                     
Peter Locke                                              1995    425,000     --           --               24,000    
Co-Chairman, Co-Chief Executive Officer and              1994    400,000     --        900,000/0           21,000    
 President                                               1993    397,000     --           --               21,000    

Donald Kushner                                           1995    425,000     --           --               21,000    
Co-Chairman, Co-Chief Executive Officer and              1994    400,000     --        900,000/0           20,000    
 Secretary                                               1993    397,000     --           --               20,000    

Lenore Nelson                                            1995    182,000     --           --               --        
Chief Financial Officer, Executive Vice President        1994     78,000     25,000    225,000/0           --        
 and Assistant Secretary                                 1993     --         --           --               --        

------------------------                                                        
(1) Does not include perquisites including non-accountable expense allowances in
    the case of Messrs. Locke and Kushner, which do not exceed the lesser of 10%
of annual salary and bonus reported or $50,000.                         

(2) Term  life insurance  premiums paid  by the Company  on behalf  of the Named
    Executive Officer in respect of a $3,500,000 policy and disability insurance
premiums paid by the Company on behalf of the Named Executive Officer.  

EMPLOYMENT AGREEMENTS                                                           

    MESSRS. KUSHNER AND LOCKE.   In March 1994,  Messrs. Kushner and Locke  each
agreed  to an amendment to his  respective employment agreement with the Company
to (i) extend the term of the                                                   

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agreement to September 1998 and (ii) reduce the maximum annual performance bonus
that each may receive to 4% of pre-tax earnings for the applicable period up  to
a  maximum of  $200,000 in  fiscal 1994,  $220,000 in  fiscal 1995,  $250,000 in
fiscal 1996, $270,000  in fiscal  1997 and $290,000  in fiscal  1998. Under  the
revised  employment agreements, Messrs.  Kushner and Locke  each received a base
salary of $400,000 in fiscal 1994  (which increased to $425,000 in fiscal  1995)
and  will receive a base salary of  $425,000 in fiscal 1996 through fiscal 1998,
subject to potential  increase upon  review of  such salaries  by the  Company's
Board of Directors.                                                             

    In  order to  induce Messrs.  Kushner and  Locke to  enter into  the amended
employment agreements, the Company granted to  each as of March 7, 1994  options
to  purchase 900,000 shares of Common Stock at an exercise price per share equal
to $0.84. The options  vest over a  five year period, with  20% vesting at  each
anniversary  of the date of grant  (subject to possible acceleration following a
"change-in-control"). Options to purchase  up to 180,000  shares have vested  to
each  officer as of  December 31, 1995.  Options granted to  Messrs. Kushner and
Locke were approved by the shareholders of the Company at the Annual Meeting  of
Shareholders held on May 17, 1994.                                              

    The  Company also  provides Messrs.  Kushner and  Locke with  certain fringe
benefits, including payment  of an amount  equal to the  premiums in respect  of
$3,500,000 of term life insurance (Messrs. Kushner and Locke have designated the
other  person as the beneficiary) and  disability insurance for each person. The
agreements permit Messrs. Kushner and  Locke to collect outside compensation  to
which  they  may be  entitled  and to  provide  incidental and  limited services
outside of  their  employment  with  the Company  and  to  receive  compensation
therefor,  so  long as  such  activities do  not  materially interfere  with the
performance of their duties  under the agreements. Each  of Messrs. Kushner  and
Locke  also may require the Company to change its name to remove his name within
one year after  the expiration  or termination of  the term  of his  employment,
except  for  product released  prior to  such termination,  and except  that the
Company may  continue to  use such  name for  a period  of one  year after  such
notice.                                                                         

    MS.  NELSON.  In April  1994, Ms. Nelson entered  into a two-year employment
contract with the  Company providing  for a base  salary of  $175,000 per  year,
subject  to annual  increases of  7 1/2%  commencing in  the second  year of the
agreement. Ms. Nelson received a signing bonus equal to $25,000 and is  entitled
to  an annual incentive bonus  equal to 1/2% of  the Company's pre-tax earnings,
which incentive bonus  cannot exceed 50%  of Ms. Nelson's  base salary for  such
year. As of April 25, 1994, the Company granted Ms. Nelson options to acquire an
aggregate  of 225,000 shares of  Common Stock at an  exercise price of $0.75 per
share; such options  vest in  installments of 75,000  shares over  a three  year
period on each anniversary of the date of the grant.                            

STOCK INCENTIVE PLAN                                                            

    The  Stock Incentive Plan adopted by the  Board of Directors in October 1988
(the "Plan") authorizes  the granting  of stock incentive  awards ("Awards")  to
qualified   officers,  employee  directors,  key  employees  and  third  parties
providing valuable  services  to  the Company,  e.g.,  independent  contractors,
consultants  and advisors to the  Company. In May 1994,  the stockholders of the
Company voted to increase  the authorized number of  shares available under  the
Plan  from 1,500,000 to 4,500,000.  The Plan may be  administered by a committee
appointed by the Board  and consisting of  three or more  members, each of  whom
must   be  disinterested.  The  Plan  is  currently  administered  by  S.  James
Coppersmith,  Stuart  Hersch   and  Milton  Okun   (for  purposes  hereof,   the
administering  body is referred to as the "Committee"). The Committee determines
the number of shares to be covered by an Award, the term and exercise price,  if
any, of the Award and other terms and provisions of Awards.                     

    The  Plan  is designed  to  help the  Company  attract and  retain qualified
persons for positions of substantial  responsibility and to provide certain  key
employees  and consultants  with an  additional incentive  to contribute  to the
success of the Company. As of  December 31, 1995, options to purchase  3,860,000
shares of the Company's Common Stock were outstanding under the Plan, options to
purchase  215,000 shares had been exercised, 199,500 options had expired or been
canceled and 425,000 shares  remained available for  granting options under  the
Plan.                                                                           

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    Awards can be Stock Options ("Options"), Stock Appreciation Rights ("SARs"),
Performance  Share  Awards ("PSAs")  and Restricted  Stock Awards  ("RSAs"). The
number and kind of shares available under the Plan are subject to adjustment  in
certain  events. Shares  relating to  Options or  SARs which  are not exercised,
shares relating to RSAs which do not vest and shares relating to PSAs which  are
not issued will again be available for issuance under the Plan.                 

    An Option may be an incentive stock option ("ISO") or a nonqualified Option.
The  exercise price for Options is to be determined by the Committee, but in the
case of an ISO is not to be less  than fair market value on the date the  Option
is  granted (110%  of fair market  value in  the case of  an ISO  granted to any
person who  owns more  than 10%  of the  Common Stock).  The purchase  price  is
payable  in any combination of cash, shares of Common Stock already owned by the
participant for  at least  six months  or,  if authorized  by the  Committee,  a
promissory note secured by the Common Stock issuable upon exercise. In addition,
the  award agreement may provide for "cashless" exercise and payment. Subject to
early termination or acceleration provisions, an Option is exercisable, in whole
or in part, from the date specified in the related award agreement (which may be
six months after the date of grant) until the expiration date determined by  the
Committee.                                                                      

    An SAR is the right to receive payment based on the appreciation in the fair
market  value of Common Stock from the date of grant to the date of exercise. In
its discretion, the Committee may grant an SAR concurrently with the grant of an
Option. An SAR is  only exercisable at  such time, and to  the extent, that  the
related  Option is exercisable. Upon exercise of an SAR, the holder receives for
each share with respect  to which the  SAR is exercised an  amount equal to  the
difference  between the  exercise price  under the  related Option  and the fair
market value of a share of Common Stock on the date of exercise of the SAR.  The
Committee  in its discretion may pay the amount in cash, shares of Common Stock,
or a combination thereof.                                                       

    An RSA is an award  of a fixed number of  shares of Common Stock subject  to
restrictions. The Committee specifies the prices, if any, the recipient must pay
for  such  shares.  Shares  included  in  an  RSA  may  not  be  sold, assigned,
transferred, pledged  or otherwise  disposed of  or encumbered  until they  have
vested.  These restrictions may not terminate  earlier than six months after the
award date. The recipient is entitled  to dividend and voting rights  pertaining
to such RSA shares even though they have not vested, so long as such shares have
not been forfeited.                                                             

    A  PSA is an award of a fixed number of shares of Common Stock, the issuance
of which is contingent upon the  attainment of such performance objectives,  and
the  payment of such  consideration, if any,  as is specified  by the Committee.
Issuance shall in any case not be earlier than six months after the award date. 

    The  Plan  also  provides   for  certain  stock  depreciation   protections,
tax-offset  bonuses and tax withholding using  shares of Common Stock instead of
cash.                                                                           

    Upon the date a  participant is no  longer employed by  the Company for  any
reason, shares subject to the participant's RSAs which have not become vested by
that date or shares subject to the participant's PSAs which have not been issued
shall be forfeited in accordance with the terms of the related Award agreements.
Options  which have become exercisable by  the date of termination of employment
or of  service on  the  Committee must  be  exercised within  certain  specified
periods  of time from the  date of termination, the period  of time to depend on
the reason for termination. Options which have not yet become exercisable on the
date the participant  terminates employment or  service on the  Committee for  a
reason  other than retirement, death or total disability shall terminate on that
date.                                                                           

    The Board of  Directors may, at  any time, terminate,  amend or suspend  the
Plan.  In  addition,  the  Committee may,  with  certain  exceptions,  amend any
provision of the Plan.                                                          

    All employees, officers and  directors of, and  consultants to, the  Company
are  eligible to participate in the Plan. The Committee determines which persons
shall be granted  options, the extent  of such grants  and, consistent with  the
Plan,   the   terms  and   conditions  thereof.   As   of  December   31,  1995,

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approximately 64 employees of the Company,  and no directors of the Company  who
are  not also employees  of the Company,  are eligible to  receive option grants
under the Plan. Options  granted under the  Plan may be  either ISOs or  options
which  are not intended to qualify as ISOs, except that ISOs may only be granted
to employees of the Company.                                                    

    The aggregate fair  market value (determined  on the date  of grant) of  the
shares  of Common Stock for  which ISOs may be  granted to any participant under
the Plan  and  any  other plan  by  the  Company or  its  affiliates  which  are
exercisable  for the first time by such participant during any calendar year may
not exceed $100,000.                                                            

    The options granted under the Plan  become exercisable on such dates as  the
Board  determines in the terms of each individual option. Options are subject to
termination in the event  of a disposition  of all or  substantially all of  the
assets   or  capital  stock  of  the  Company   by  means  of  a  sale,  merger,
consolidation, reorganization, liquidation  or otherwise;  unless the  Committee
arranges  for a continuation of the Plan  or for the optionee to receive payment
or new options covering  shares of the corporation  purchasing or acquiring  the
assets or stock of the Company, in substitution of the options granted under the
Plan.  The Committee in any event may, on  such terms and conditions as it deems
appropriate, accelerate the exercisability of options granted under the Plan. An
ISO to a  holder of  more than 10%  of the  total combined voting  power of  all
classes  of stock of the  Company must expire no later  than five years from the
date of grant. A nonqualified stock option  must expire no later than ten  years
from the date of the grant.                                                     

    The  options granted under the Plan are  not transferable other than by will
or the laws of descent and  distribution. Unexercised options generally lapse  3
months  after  termination of  employment other  than  by reason  of retirement,
disability or death in which case it terminates one year thereafter.            

    The Plan provides for anti-dilution adjustments which are applicable in  the
event    of   a    reorganization,   merger,    combination,   recapitalization,
reclassification, stock dividend, stock split  or reverse stock split;  however,
no  such adjustment  need be made  if it  is determined that  the adjustment may
result in the receipt of federally taxable income to optionees or the holders of
Common Stock or other classes of the Company's securities. Upon the  dissolution
or liquidation of the Company, or upon a reorganization, merger or consolidation
of the Company as a result of which the Company is not the surviving entity, the
Plan  shall  terminate,  and  any  outstanding  awards  shall  terminate  and be
forfeited unless assumed by the successor corporation.                          

    The Plan currently provides that the Board  may amend the Plan at any  time;
provided,  however, that no amendment may operate to increase the maximum number
of aggregate  shares  issuable, materially  increase  the benefits  accruing  to
participants  or change the  classes of eligible persons  under the Plan without
the approval of the holders of a majority of the shares of Common Stock.        

    During fiscal 1995, the Company  committed, subject to final  documentation,
to  reprice options  to purchase  200,000 shares  and 400,000  shares previously
granted to Gregory  Cascante and  Lawrence Mortorff, respectively,  to the  then
current  market price of the Company's  common stock. The determination was made
to reprice  such options  in connection  with obtaining  the agreement  of  such
employees  to  certain amendments  to their  employment contracts.  See "Certain
Relationships and Related Transactions."                                        

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

                                                        · Enlarge/Download Table

                                                            NUMBER OF SECURITIES                            
                                                           UNDERLYING UNEXERCISED   VALUE OF UNEXERCISED    
                                                 VALUE      OPTIONS/SARS AT FY-     IN-THE-MONEY OPTIONS/   
                           SHARES ACQUIRED     REALIZED     END (#) EXERCISABLE/     SARS AT FY-END ($)     
         NAME              ON EXERCISE (#)        ($)          UNEXERCISABLE       EXERCISABLE/UNEXERCISABLE
-----------------------  -------------------  -----------  ----------------------  -----------------------  
                                                                                                            
Peter Locke                         -0-           N/A            180,000/720,000             0/0            
Donald Kushner                      -0-           N/A            180,000/720,000             0/0            
Lenore Nelson                       -0-           N/A             75,000/150,000             0/0            

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

    During  the most recently completed fiscal  year, the Board of Directors did
not have a compensation  committee. Rather, the full  Board of Directors of  the
Company   participates  in  deliberations   and  decisions  regarding  executive
compensation. Other than Messrs.  Kushner and Locke, no  member of the Board  of
Directors  was, during the fiscal  year, or formerly, an  officer or employee of
the Company  or any  of its  subsidiaries. During  fiscal year  1995, Mr.  Locke
served as Co-Chairman of the Board , Co-Chief Executive Officer and President of
the  Company,  and Mr.  Kushner  served as  Co-Chairman  of the  Board, Co-Chief
Executive and Secretary of the Company.                                         

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS

    The following table sets forth certain  information as of December 31,  1995
concerning  the beneficial ownership of Common Stock,  by (i) each person who is
known to the Company to be a beneficial owner of more than 5% of the outstanding
Common Stock; (ii) each of the current  Directors of the Company; (iii) each  of
the  Named  Executive Officers;  and (iv)  all  current Directors  and Executive
Officers of the Company as a group.                                             

                                                        · Enlarge/Download Table

                                                                                  COMMON STOCK          PERCENT OF 
BENEFICIAL OWNER                                                               BENEFICIALLY OWNED        CLASS (8) 
-------------------------------------------------------------------------  ---------------------------  -----------
                                                                                                                   
Peter Locke..............................................................     3,346,017(1)                    9.28%
11601 Wilshire Blvd., 21st Floor                                                                                   
Los Angeles, CA 90025                                                                                              

Donald Kushner...........................................................     3,346,942(1)(2)                 9.28%
11601 Wilshire Blvd., 21st Floor                                                                                   
Los Angeles, CA 90025                                                                                              

Stuart Hersch............................................................       536,288(3)                    1.49%
11601 Wilshire Blvd., 21st Floor                                                                                   
Los Angeles, CA 90025                                                                                              

Milton Okun..............................................................       512,820(4)                    1.42%
11601 Wilshire Blvd., 21st Floor                                                                                   
Los Angeles, CA 90025                                                                                              
(310) 275-7618                                                                                                     

Lenore Nelson............................................................        75,000(5)                   *     
11601 Wilshire Blvd., 21st Floor                                                                                   
Los Angeles, CA 90025                                                                                              

S. James Coppersmith.....................................................        25,000                      *     
11601 Wilshire Blvd., 21st Floor                                                                                   
Los Angeles, CA 90025                                                                                              
(617) 631-2097                                                                                                     

Froley, Revy Investment Co., Inc.........................................     4,393,054(6)                   10.96%
10900 Wilshire Boulevard                                                                                           
Suite 1050                                                                                                         
Los Angeles, CA 90024                                                                                              

FMR Corp.................................................................     3,076,923(7)                    7.94%
82 Devonshire Street                                                                                               
Boston, Massachusetts 02109                                                                                        

All directors and executive officers as a group                                                                    
 (six individuals).......................................................     7,842,067(1)(2)(3)(4)(5)       20.96%

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------------------------                                                        
*   Less than 1%                                                                

(1) Includes 360,000 shares subject  to options which are currently  exercisable
    or  exercisable  within 60  days of  the date  hereof, and  excludes 540,000
    options which are not currently exercisable or exercisable within 60 days of
the date hereof.                                                        

(2) Includes 200,000 shares owned by a corporation controlled by Mr. Kushner.   

(3) Includes 427,096 shares subject to options currently exercisable.           

(4) Represents shares of Common Stock issuable upon conversion of the  Company's
    8%  Convertible Subordinated  Debentures ("8% Debentures")  due December 15,
2000 beneficially owned by Mr. Okun.                                    

(5) Includes 75,000 shares subject to options which are currently exercisable or
    exercisable within 60 days of the date hereof, and excludes 150,000  options
    which  are not  currently exercisable or  exercisable within 60  days of the
date hereof.                                                            

(6) Represents shares of Common Stock issuable upon conversion of the  Company's
    8% and the Company's 9% Convertible Subordinated Debentures due July 1, 2002
    beneficially  owned  by Froley,  Revy Investment  Co., Inc.  The information
    provided herein is based  on information contained in  a Schedule 13G  dated
    February  27, 1995 as  filed by Froley,  Revy Investment Co.,  Inc. with the
    Securities  and  Exchange  Commission   and  information  provided  from   a
representative of the beneficial owner.                                 

(7)  Represents shares of Common Stock issuable upon conversion of the Company's
    8% Debentures  beneficially  owned by  FMR  Corp. The  information  provided
    herein  is based on information contained in  a Schedule 13G dated March 31,
    1995 as filed by FMR Corp.  with the Securities and Exchange Commission  and
information provided from a representative of the beneficial owner.     

(8)  As a percentage of  the 35,679,607 shares outstanding  on December 31, 1995
    plus certain shares  issuable upon conversion  of convertible securities  or
subject to options held by such person or persons.                      

    Messrs.  Kushner and Locke  have entered into an  agreement dated October 1,
1988 (the "Cross-Purchase Agreement"), which provides that (i) upon the death of
either party, the  surviving party is  obligated to purchase  the number of  the
decedent's  shares in the Company the aggregate value of which equals $3,500,000
(a $3,500,000 life insurance policy  has been taken out  by the Company for  the
benefit  of each of Messrs. Kushner and Locke  on the life of the other person),
the surviving party shall have the  option, but not the obligation, to  purchase
the  remaining shares at the same price  per share if the insurance proceeds are
less than the aggregate purchase price for all of the decedent's shares, (ii) if
either party desires to  sell his shares  of Common Stock,  other than a  market
transaction,  the  other party  shall  have a  right  of first  negotiation with
respect to such shares; and  (iii) if either of Messrs.  Kushner or Locke is  no
longer  employed by the Company by reason of termination (A) by such person, (B)
for cause, (C) on account  of disability or (D)  by expiration of such  person's
employment  agreement, and the other party  is employed, the employed party will
have the right to purchase the other  party's shares for an amount equal to  90%
of  the average of the bid and ask price  per share for the 30 days prior to the
date on which such option is exercised.  The option must be exercised no  sooner
than  three  months  nor later  than  six  months from  the  date  employment is
terminated and must  be accompanied  by payment equal  to 10%  of the  aggregate
purchase price. The balance of the purchase price is to be paid in cash no later
than  six  months from  the date  of  exercise. Messrs.  Kushner and  Locke have
entered  into  a   Trust  Agreement   to  effectuate  the   provisions  of   the
Cross-Purchase Agreement.                                                       

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ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

    In  fiscal 1993, the Company entered into a domestic home video distribution
agreement with WarnerVision for the feature film DEADLY EXPOSURE. Stuart Hersch,
a Director  of the  Company, was  president of  WarnerVision at  this time.  The
distribution agreement provides for payment by WarnerVision to the Company of an
advance  in exchange for certain domestic  home video rights, subject to certain
back-end participation rights  of the Company,  and payments by  the Company  to
WarnerVision  of 30%  of the Company's  net revenues derived  from Canadian home
video  and  broadcast  television  exploitation  of  DEADLY  EXPOSURE.   Through
September  30, 1995, the Company has  paid approximately $27,800 to WarnerVision
pursuant to such agreement.                                                     

    In fiscal 1994, the  Company entered into  certain motion picture  financing
arrangements  with  WarnerVision  whereby  WarnerVision  and  the  Company share
production costs and expenses and any resulting revenues with respect to certain
motion  pictures.  The  Company  has  also  entered  into  domestic  home  video
distribution  agreements with WarnerVision for the feature films LADY-IN-WAITING
and LAST GASP. These agreements provide  for the payment by WarnerVision to  the
Company  of  $510,000  and  $530,000  in  exchange  for  WarnerVision  receiving
participation  rights  with  the  Company  in  the  revenues  derived  from  the
exploitation  of LADY-IN-WAITING and  LAST GASP, respectively.  The Company also
agreed to license  to WarnerVision  domestic distribution rights  to WES  CRAVEN
PRESENTS:  MIND  RIPPER  for  a  recoupable  minimum  guaranty  payment  against
revenues.                                                                       

    In fiscal 1995, the Company entered into a $696,000 net revenue  arrangement
with  WarnerVision similar to DOUBLE EXPOSURE, LADY-IN-WAITING and LAST GASP for
a fourth film entitled SERPENT'S LAIR.  Through September 30, 1995, the  Company
had  received approximately $1,986,000 from  WarnerVision towards the production
costs and expenses of  these films pursuant to  such financing and  distribution
arrangements.  The Company believes that the  terms of the forgoing transactions
are no less favorable to the Company than those that could have been obtained in
transactions with unaffiliated third parties.                                   

    Following the  conclusion of  fiscal  1994, the  Company agreed  to  advance
August  Entertainment, Inc.  ("August") up to  $1,000,000 of  which $650,000 was
advanced and  which bears  interest  at the  lesser of  (a)  Prime (8.5%  as  of
December  31, 1995)  + 2%  and (b)  10%. Gregory  Cascante, President  and Chief
Executive Officer of  Kushner-Locke International, Inc.,  is also President  and
Chief  Executive  Officer  of August  Entertainment.  The  Company's outstanding
advance is secured by  all of the  assets of August, including  a pledge of  all
sales  commissions due to August from the  films SLEEP WITH ME, LAWNMOWER MAN II
and NOSTRADAMUS  from which  the Company  has been  paid approximately  $170,000
against  this  advance. As  of  September 30,  1995  the outstanding  balance of
principal and accrued interest was approximately $676,500. In addition, pursuant
to an agreement between the Company  and August, August receives producer  fees,
profit  participations  and overrides  on domestic  and international  sales for
films which  are being  packaged  by August  in conjunction  with  Kushner-Locke
International, Inc. Films which may generate such fees to August are FREEWAY and
MANSLAYER.                                                                      

    Mr.  Cascante manages the international film  sales of the Company through a
separate subsidiary of the Company. Under his employment agreement entered  into
in September 1994, Mr. Cascante was to receive a percentage of pre-tax profit of
Kushner-Locke  International, Inc. ranging  from 2.5% to 10%  based on a sliding
scale related to certain  profit thresholds, with  an aggregate of  compensation
and  pre-tax profit payments not to exceed  200% of his $187,500 base salary. In
September 1995, Mr. Cascante and the Company agreed in principle, and subject to
documentation, to amend his employment agreement to, among other things,  remove
his  pre-tax  profit  participation  in  Kushner-Locke  International,  Inc. Mr.
Cascante's base salary for fiscal 1996 is $243,750.                             

    Lawrence Mortorff, President of KL Features, Inc., manages the feature  film
division  of the  Company through  this subsidiary of  the Company  which is 95%
owned by the Company, and 5% owned by Mr. Mortorff. Mr. Mortorff has  personally
received  loans from the Company payable on  demand which bear interest at Prime
(8.5% as  of  December 31,  1995)  +  1 1/2%.  As  of September  30,  1995,  the
outstanding amount of such loans was approximately $74,000, which will be repaid
through an                                                                      

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assignment  of  production  bonuses.  Pursuant  to  an  October  1993 employment
agreement with the Company, Mr. Mortorff received a salary of $198,000 in fiscal
1995 and additional compensation in bonuses for each film that KL Features, Inc.
produced based on the amount of the  production budget of each such film.  Under
an  amendment to his employment agreement, subject to final documentation, it is
contemplated that Mr. Mortorff  will receive an annual  salary of $325,000;  his
ownership  interest in KL Features, Inc. will be capped at 5% and the definition
and terms of his production bonuses will be modified.                           

    Cherry Lane Music Company, Inc. ("Cherry Lane"), which is owned by Board  of
Directors  member Milton Okun, has entered into an agreement to become the music
administrator for The  Kushner-Locke Company effective  August 15, 1994.  Cherry
Lane  will receive  specified fees for  the collection of  revenues derived from
music publishing and record contracts.                                          

    The Company believes  that the terms  of the foregoing  transactions are  no
less  favorable  to the  Company than  those  that could  have been  obtained in
transactions with unaffiliated third parties.                                   

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SIGNATURES

    Pursuant  to  the requirements  of  Section 13  or  15(d) of  the Securities
Exchange Act of 1934, the  Company has duly caused this  report to be signed  on
its behalf by the undersigned, thereunto duly authorized.                       

Date: January 24, 1996                                                          

                             THE KUSHNER-LOCKE COMPANY
                (Registrant)

                                By:          /s/ PETER LOCKE

                                             -----------------------------------
                                             Peter Locke
                                             CO-CHAIRMAN OF THE BOARD,
                                            CO-CHIEF EXECUTIVE OFFICER AND
                                             PRESIDENT

                                 By:        /s/ DONALD KUSHNER

                                             -----------------------------------
                                            Donald Kushner
                                             CO-CHAIRMAN OF THE BOARD,
                                            CO-CHIEF EXECUTIVE OFFICER AND
                                             SECRETARY

                                 By:         /s/ LENORE NELSON

                                             -----------------------------------
                                             Lenore Nelson
                                            CHIEF FINANCIAL OFFICER, EXECUTIVE
                                            VICE PRESIDENT AND ASSISTANT
                                             SECRETARY

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    Pursuant  to the requirements  of the Securities Exchange  Act of 1934, this
Report has been signed below by the  following persons on behalf of the  Company
and in the capacities and on the dates indicated.                               

       SIGNATURE                         TITLE                  DATE
-----------------------------------  -------------------------  ----------------

                  Co-Chairman of the Board
/s/ PETER LOCKE             and Co-Chief Executive          
-----------------------------------   Officer and President;    January 24, 1996
Peter Locke               Director                      

                   Co-Chairman of the Board,
/s/ DONALD KUSHNER            Co-Chief Executive                
-----------------------------------   Officer and Secretary;    January 24, 1996
Donald Kushner              Director                        

-----------------------------------  Director                   January   , 1996
Stuart Hersch                                             

/s/ MILTON OKUN                                             
-----------------------------------  Director                   January 24, 1996
Milton Okun                                             

/s/ S. JAMES COPPERSMITH                                              
-----------------------------------  Director                   January 25, 1996
S. James Coppersmith                                              

/s/ LENORE NELSON           Chief Financial Officer,          
-----------------------------------   Executive Vice President  January 24, 1996
Lenore Nelson              and Assistant Secretary        

13

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K/A Filing		Date		First		Last			Other Filings
		3/7/94		5
		4/25/94		5
		5/17/94		5
		8/15/94		11
		9/1/94		3
		2/27/95		9
		3/31/95		9					10-Q, 10-Q/A, SC 13G
For The Period Ended		9/30/95		1		10			10-K, NT 10-K
		12/31/95		1		10			10-Q
		1/24/96		12		13
		1/25/96		13
Filed On / Filed As Of		1/29/96
		12/15/0		9
		7/1/2		9					8-K
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