EXHIBIT 99.4
STOCK PURCHASE AGREEMENT
AMONG
METROMEDIA INTERNATIONAL GROUP, INC.,
ORION PICTURES CORPORATION
AND
P&F ACQUISITION CORP.
DATED AS OF MAY 2, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS......................................................1
1.01. Definitions.........................................................1
1.02. Index of Other Defined Terms........................................9
ARTICLE II. TRANSFER OF ASSETS.............................................11
2.01. Sale of Stock......................................................11
2.02. Closing............................................................11
2.03. Purchase Price.....................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER......................13
3.01. Ownership of Stock.................................................13
3.02. Corporate Existence and Power......................................13
3.03. Corporate Authorization of Seller..................................13
3.04. Subsidiaries.......................................................13
3.05. Entertainment Group................................................14
3.06. Corporate Authorization............................................14
3.07. Governmental Authorization.........................................14
3.08. Non-Contravention..................................................14
3.09. Financial Statements; Undisclosed Liabilities......................15
3.10. Absence of Certain Changes.........................................15
3.11. Properties; Tangible Assets........................................17
3.12. Affiliates.........................................................17
3.13. Litigation.........................................................18
3.14. Contracts..........................................................18
3.15. Permits; Required Consents.........................................20
3.16. Compliance with Applicable Laws....................................20
3.17. Employment Agreements; Change in Control; and Employee Benefits....20
3.18. Labor and Employment Matters.......................................23
3.19. Intellectual Property..............................................24
3.20. Library Films......................................................25
3.21. Films In Progress..................................................27
3.22. Development Projects...............................................30
3.23. Advisory Fees......................................................30
3.24. Environmental Compliance...........................................30
3.25. Insurance..........................................................31
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3.26. Tax Matters........................................................31
3.27. SEC Documents......................................................31
3.28. Disclosure.........................................................31
3.29. Financial Statements of Landmark...................................32
3.30. No Contract With Landmark..........................................32
3.31. Board Recommendations..............................................32
3.32. Bankruptcy.........................................................33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER........................33
4.01. Corporate Existence and Power......................................33
4.02. Corporate Authorization............................................33
4.03. Governmental Authorization.........................................33
4.04. Non-Contravention..................................................34
4.05. Advisory Fees......................................................34
4.06. Litigation.........................................................34
4.07. Purchase for Investment............................................34
4.08. Ownership of MGM...................................................34
ARTICLE V. COVENANTS OF SELLER AND ORION...................................34
5.01. Conduct of the Business............................................35
5.02. Access to Information 38
5.03. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents...................................38
5.04. Maintenance of Insurance Policies..................................38
5.05. Confidentiality....................................................39
5.06. Specific Performance...............................................40
5.07. Bankruptcy Cases...................................................40
5.08. No Solicitations...................................................40
5.09. Transfer of Assets.................................................41
5.10. Use of Trade Names.................................................42
ARTICLE VI. COVENANTS OF BUYER.............................................42
6.01. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents...................................42
6.02. Confidentiality....................................................42
6.03. Specific Performance...............................................42
6.04. Use of Metromedia Name.............................................43
6.05. Bank Waivers.......................................................43
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ARTICLE VII. COVENANTS OF ALL PARTIES......................................43
7.01. Further Assurances.................................................43
7.02. Certain Filings....................................................43
7.03. Public Announcements...............................................43
7.04. Administration of Accounts.........................................44
7.05. Specific Performance...............................................44
7.06. Right of First Negotiation.........................................44
7.07. Proxy Consent Solicitation.........................................44
7.08. Refinancing of Debt................................................45
ARTICLE VIII. CONDITIONS TO CLOSING........................................46
8.01. Conditions to Obligation of Buyer..................................46
8.02. Conditions to Obligation of Seller.................................47
ARTICLE IX. INDEMNIFICATION................................................49
9.01. Indemnification of Buyer...........................................49
9.02. Indemnification of Seller..........................................49
9.03. Survival of Representations, Warranties and Covenants..............50
9.04. Claims for Indemnification.........................................50
9.05. Defense of Claims..................................................51
9.06. Nature of Payments.................................................52
9.07. Taxes...............................................................52
ARTICLE X. TERMINATION.....................................................52
10.01. Grounds for Termination...........................................52
10.02. Effect of Termination.............................................54
10.03. Commitment Fee....................................................54
ARTICLE XI. TAX MATTERS....................................................57
11.01. Tax Returns and Payments..........................................57
11.02. Section 338(h)(10)................................................58
11.03. Indemnification...................................................59
11.04. Procedures for Indemnification....................................59
ARTICLE XII. MISCELLANEOUS.................................................60
12.01. Notices...........................................................60
12.02. Amendments; No Waivers............................................62
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12.03. Construction......................................................62
12.04. Expenses..........................................................63
12.05. Successors and Assigns............................................63
12.06. Governing Law.....................................................63
12.07. Counterparts; Effectiveness.......................................63
12.08. Entire Agreement..................................................63
12.09. Captions..........................................................63
12.10. Severability......................................................63
12.11. Forum; Attorneys' Fees............................................63
12.12. Cumulative Remedies...............................................64
12.13. Third Party Beneficiaries.........................................64
12.14. Knowledge.........................................................64
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SCHEDULES
Schedule 1.01 Permitted Liens
Schedule 1.02 Statement of Assumptions
Schedule 3.04 Subsidiaries
Schedule 3.08(c) Conflicts
Schedule 3.09 Financial Statements; Undisclosed Liabilities
Schedule 3.10(e) Absence of Certain Changes
Schedule 3.10(h) Distributions
Schedule 3.11(a) Liens
Schedule 3.11(c) Leases
Schedule 3.11(d) Real Property Owned
Schedule 3.12 Affiliates
Schedule 3.13 Litigation
Schedule 3.14(a) Scheduled Contracts
Schedule 3.14(b) Valid and Binding Contracts
Schedule 3.14(c) Participations
Schedule 3.15(a) Permits
Schedule 3.15(b) Required Consents
Schedule 3.16 Compliance with Applicable Laws
Schedule 3.17(a) Certain Employment Agreements
Schedule 3.17(b) Other Employment Agreements
Schedule 3.17(c) Benefit Plans
Schedule 3.17(d) Employee Pension Benefit Plans
Schedule 3.17(e) Multiemployer Plans
Schedule 3.17(f) Entertainment Plans
Schedule 3.18(a) Labor and Employment Matters
Schedule 3.18(b) Labor Disputes
Schedule 3.19(a) Owned Intellectual Property Rights
Schedule 3.19(b) Licensed Intellectual Property Rights
Schedule 3.19(c) Licenses
Schedule 3.19(d) Claims
Schedule 3.19(e) Royalties
Schedule 3.20(a) Library Films
Schedule 3.20(a)(i) Availability Dates
Schedule 3.20(a)(ii) Film Rights
Schedule 3.20(a)(iii)Dormant Films
Schedule 3.20(a)(iv) Film Liens
Schedule 3.20(b) Ratings
Schedule 3.20(c) Elements
Schedule 3.20(f) Copyrights
Schedule 3.20(g) Music
Schedule 3.20(i) Insurance Claims
Schedule 3.20(j) Rights
Schedule 3.20(l) Participations
Schedule 3.21(a) Films In Progress
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Schedule 3.21(b) Ownership
Schedule 3.21(c) Ratings
Schedule 3.21(d) Elements
Schedule 3.21(i) Copyrights
Schedule 3.21(j) Music
Schedule 3.21(l) Insurance Claims
Schedule 3.21(m) Rights
Schedule 3.21(o) Participations
Schedule 3.22 Development Projects
Schedule 3.24(a) Environmental Permits
Schedule 3.24(b) Compliance with Environmental Laws
Schedule 3.24(c) Continuing Compliance with Environmental Laws
Schedule 3.25 Insurance
Schedule 3.26 Tax Matters
Schedule 3.29(a) Landmark Financial Statements
Schedule 3.29(b) Landmark Transferred Assets
Schedule 3.30 Contracts with Landmark
Schedule 3.32(c) Plan Liens
Schedule 5.01(a)(ix) Budgets
Schedule 7.06 First Negotiation Territories
Schedule 9.01(c) Indemnified Litigation
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") dated as of May 2,
1997 is by and among METROMEDIA INTERNATIONAL GROUP, INC., a Delaware
corporation ("Seller"), ORION PICTURES CORPORATION, a Delaware corporation
("Orion" and, together with all of its direct and indirect subsidiaries other
than the Landmark Theater Group and its subsidiaries ("Landmark"), the
"Entertainment Companies"), and P&F ACQUISITION CORP., a Delaware corporation
("Buyer").
R E C I T A L S
A. The Entertainment Companies are engaged in the business of the
production and worldwide distribution and exploitation in all media of motion
pictures, television programming and other filmed entertainment, including the
exploitation of a library of motion pictures, television programming and other
filmed entertainment;
B. Seller owns all of the issued and outstanding stock of Orion (the
"Shares"); and
C. Seller desires to sell and Buyer desires to purchase all of the
Shares on the terms and conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such Person.
"ALTERNATIVE PROPOSAL" shall mean a proposal or offer (other than by
Buyer) for a stock purchase, asset acquisition, merger, consolidation or other
business combination involving any Entertainment Company or any proposal to
acquire in any manner a direct or indirect substantial equity interest in, or
all or any substantial part of the assets of, any Entertainment Company, but
shall not include a proposal or offer to acquire an equity interest in Seller by
a Person that agrees for the benefit of Buyer to cause Seller to comply with the
terms of this Agreement and to vote all
shares of Seller's common stock or other equity securities beneficially owned by
such Person in favor of approval of this Agreement and the transactions
contemplated hereby.
"APPLICABLE LAW" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority (including any Environmental
Law) applicable to such Person or any of its Affiliates or Plan Affiliates or
any of their respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person or any
of its Affiliates or Plan Affiliates).
"ASSOCIATE" or "ASSOCIATED WITH" means, when used to indicate a
relationship with any Person, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities issued by such other
Person, (b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, and (c) any relative or spouse of such Person, or any
relative of such spouse who has the same home as such Person or who is a
director or officer of such Person or any Affiliate thereof.
"BANKRUPTCY CASES" means the bankruptcy cases of IN RE ORION
PICTURES, INC., A DELAWARE CORPORATION, ET. AL., DEBTORS, jointly administered
under case number 91 B 15635 (BRL) commenced in the Bankruptcy Court under title
11 of the United States Bankruptcy Code.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Southern District of New York acting in any of the Bankruptcy Cases.
"BENEFIT ARRANGEMENT" means any material benefit arrangement that is
not an Employee Benefit Plan, including, without limitation, (i) each employment
or consulting agreement, (ii) each arrangement providing for insurance coverage
or workers' compensation benefits, (iii) each incentive bonus or deferred bonus
arrangement, (iv) each arrangement providing termination allowance, severance or
similar benefits, (v) each equity compensation plan, (vi) each deferred
compensation plan and (vii) each compensation policy and practice maintained by
Seller or any Entertainment Company or any ERISA Affiliate of any of the
foregoing covering the employees, former employees, directors and former
directors thereof and the beneficiaries of any of them.
"BENEFIT PLAN" means an Employee Benefit Plan or Benefit
Arrangement.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"BUYER AFFILIATED GROUP" shall mean Buyer and members of the
affiliated group, within the meaning of Section 1504 of the Code, of which Buyer
is the common parent.
"CODE" means the Internal Revenue Code of 1986, as amended.
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"CONFIRMATION DOCUMENTS" means the Plan of Reorganization and the
Order Confirming Plan, and any other orders of the Bankruptcy Court entered in
the Bankruptcy Cases, which modifies the treatment of the claims of creditors or
of equity security holders or that limits the power or authority of any
Entertainment Company to use, sell or lease its property as authorized by
applicable non-bankruptcy law, or that requires any Entertainment Company to
give notice to or obtain the approval of the Bankruptcy Court in connection with
the conduct of its business and affairs.
"CONTRACTS" means all contracts, agreements, options, leases,
License Agreements, output agreements, distribution contracts, sales and
purchase orders, commitments, instruments and other obligations of any kind,
whether written or oral, inclusive of amendments, to which any Entertainment
Company is a party on the Closing Date, including the Scheduled Contracts and
the Subsequent Material Contracts.
"CONSOLIDATED RETURNS" shall mean federal Income Tax Returns that
Seller has elected to file on a consolidated basis.
"DAMAGES" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement net of
insurance proceeds actually received, including without limitation (i) interest
on cash disbursements in respect of any of the foregoing at the Reference Rate
in effect from time to time, compounded quarterly, from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (ii) reasonable costs, fees and expenses of
attorneys, accountants and other agents of such Person.
"DEBT" means any indebtedness of any Entertainment Company, whether
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or other similar instruments or letters of credit (or reimbursement
obligations in respect thereof) or banker's acceptances or representing
capitalized lease obligations or the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or account payable, in each case incurred in the ordinary course of
business, as well as all indebtedness of others secured by a Lien on any asset
of any Entertainment Company (whether or not such indebtedness is assumed by an
Entertainment Company) and, to the extent not otherwise included, any Guaranty
by any Entertainment Company of any indebtedness of any other Person (other than
another Entertainment Company).
"ELEMENTS" means negative and positive film, soundtracks, music
tracks, effects tracks, optical, audio, video and advertising materials and
supplies associated with any Film.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by Seller or any
Entertainment Company or any ERISA Affiliate thereof covering employees or
former employees of any Entertainment Company.
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"EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA,
other than a Multiemployer Plan.
"ENVIRONMENTAL LAWS" means all Applicable Laws relating to the
protection of the environment or human health including, without limitation, (i)
all requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land; (ii) all requirements
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature; and (iii) the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the Clean Air Act, the Water Pollution Control
Act, the Safe Drinking Water Act, the Toxic Substances Control Act ("TSCA") and
all regulations promulgated pursuant to any of these or analogous state or local
statutes.
"ENVIRONMENTAL LIABILITIES" means Liabilities of a Person that arise
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
"EXISTING ORION CREDIT FACILITY" means the Amended and Restated
Credit, Guaranty and Security Agreement, dated as of June 27, 1996, by and among
Orion, the lenders listed therein and The Chase Manhattan Bank, as agent.
"FILMS" means motion pictures (including feature films), shorts,
television programming, animated programming or other filmed entertainment, and
the components thereof (whether or not now known or recognized) as to which any
Entertainment Company owns any right, title or interest including, without
limitation, Library Films, Films In Progress and Development Projects and
including, without limitation: (i) completed, delivered and released projects;
(ii) works in progress comprising projects in development, principal photography
and/or post-production, projects complete but not yet released, and unreleased
or completed but undelivered pick-ups; (iii) underlying rights in and to the
literary, musical and dramatic and other material associated with or related to
or necessary to the exploitation of the works or projects referred to in clauses
(i) or (ii) including, without limitation, copyrights pertaining thereto; (iv)
to the extent related to the works or projects referred to in clauses (i) or
(ii), sequel, prequel and remake rights, all rights to novelization,
merchandising, character, serialization, games and interactive video; (v) all
other ancillary and subsidiary rights throughout the universe related to such
works and projects; (vi) all Elements; and (vii) all contractual and other
rights associated with or related to such works or
4
projects and the related ancillary and subsidiary rights whether in any media
now known or hereafter developed.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court (including, without limitation, the Bankruptcy
Court), government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any political
or other subdivision, department or branch of any of the foregoing.
"GROUP HEALTH PLAN" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
"GUARANTY" means, as to any Person (the "GUARANTEEING PERSON"), any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has made or issued a guaranty, reimbursement,
counterindemnity or similar obligation, in any case guaranteeing or in effect
guaranteeing any Debt, lease, dividend or other obligation (the "PRIMARY
OBLIGATION") of any other Person (the "PRIMARY OBLIGOR"), in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
payment thereof including, without limitation, any negative pick-up obligation,
or (iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term
Guaranty shall not include (A) endorsements of instruments for deposit or
collection in the ordinary course of business, (B) commitments to produce Films,
(C) minimum guaranteed payments in License Agreements with respect to Films, or
(D) obligations in respect of Participations payable to others, which
Participations were created in connection with the development, production,
acquisition, distribution, exhibition, exploitation or financing of Films. The
amount of any obligation in respect of a Guaranty shall be deemed to be the
lower of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guaranty, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guaranty shall be such
guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by Buyer in good faith.
"HAZARDOUS SUBSTANCE" means any substance, waste or material: (i)
the presence of which requires investigation or remediation under any
Environmental Law; or (ii) the generation, storage, treatment, transportation,
disposal, remediation, removal, handling or management of which
5
is regulated by any Environmental Law; or (iii) that is defined as a "hazardous
waste" or "hazardous substance" under any Environmental Law; or (iv) that is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise hazardous and is regulated by any Governmental Authority;
or (v) the presence of which poses a hazard to the health or safety of Persons;
or (vi) the presence of which constitutes a nuisance, trespass or other tortious
condition for which a Seller could be or is alleged to be liable; or (vii)
without limitation, that contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"INCOME TAX" shall mean all Taxes based upon, measured by or
calculated with respect to net income or profits, including any interest,
penalty or addition thereto.
"INDEMNIFYING PARTY" means: (i) with respect to any Buyer Indemnitee
asserting a claim under Sections 9.01 or 12.12, Seller; and (ii) with respect to
any Seller Indemnitee asserting a claim under Sections 9.02 or 12.12, Buyer.
"INDEMNITEE" means: (i) each of Buyer and its Affiliates with
respect to any claim for which Seller is an Indemnifying Party under Sections
9.01 or 12.12; and (ii) Seller and its Affiliates with respect to claims for
which Buyer is an Indemnifying Party under Sections 9.02 or 12.12.
"IRS" means the Internal Revenue Service.
"LIABILITY" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person.
"LICENSE AGREEMENTS" means agreements to which any Entertainment
Company is a party or by which any Entertainment Company is otherwise bound,
pursuant to which an Entertainment Company grants or licenses to or acquires
from a third party any right, title or interest relating to the distribution,
exhibition or other exploitation of one or more Films.
"LIEN" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"LIBOR" shall mean, with respect to each day during any applicable
one month period, the one month London interbank offered rate for Dollar
deposits as of 11:00 a.m. (London time) on the day which is two Business Days
prior to the first day of such period, as quoted on Telerate page 3750 or on
such replacement system as is then customarily used to quote the London
interbank offered rate. If two or more such rates appear on Telerate page 3750
or associated pages,
6
the rate in respect of such period shall be the arithmetic mean of such offered
rates (rounded upwards, if necessary, to the nearest 1/100th of one percent).
"MATERIAL ADVERSE EFFECT" means a material change in, or material
adverse effect on, the assets, liabilities, business, operations or financial
condition of the Entertainment Companies taken as a whole.
"MGM CREDIT FACILITY" means the $800 Million Credit Agreement, dated
as of October 10, 1996, among Metro-▇▇▇▇▇▇▇-▇▇▇▇▇ Inc., the Lenders listed
therein, the L/C issuers named therein and ▇▇▇▇▇▇ Guaranty Trust Company of New
York, as agent, and all related documents.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
"NEW ORION CREDIT FACILITY" means a revolving credit facility,
naming Orion as borrower, that is to take effect concurrent with the Closing and
that in all respects is in form and substance satisfactory to Buyer.
"ORDER CONFIRMING PLAN" means the order of the Bankruptcy Court
entitled "Order Confirming the Debtors' Modified Third Amended Joint
Consolidated Plan of Reorganization," dated October 20, 1992, entered in the
Bankruptcy Cases.
"PARTICIPATIONS" means, with respect to any Film, all amounts
(whether described as a deferment, a gross participation or otherwise) which any
Entertainment Company may be contractually obligated to pay to any person, for
rights or services in connection with any Film and which are based on or
dependent on all or any percentage of the proceeds of the Film (irrespective of
the manner in which such proceeds are defined or computed), including royalties,
residuals and guild payments, whether or not such payment has then become due or
been made.
"PERMITTED LIENS" means (i) Liens for Taxes or governmental
assessments; charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith; (iii) Liens relating to
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
(iv) Liens securing executory obligations under any Lease that constitutes an
"operating lease" under GAAP; (v) guild Liens; (vi) customary Liens (a) granted
in the ordinary course to secure a licensee's ability to retain distribution
rights under a License Agreement to which the licensee is a party and (b) which
Liens, if enforced, in the aggregate would not have a Material Adverse Effect;
and (vii) other Liens set forth on SCHEDULE 1.01 hereto. Notwithstanding the
foregoing, no Lien arising under the Code or ERISA with respect to the
operation, termination, restoration or funding of any Benefit Plan sponsored by,
maintained by or contributed to by Seller or any Entertainment Company or by any
7
of their ERISA Affiliates or arising in connection with any material excise tax
or penalty tax with respect to such Benefit Plan shall be a Permitted Lien.
"PERSON" means an individual, corporation, partnership, association,
trust, estate or other entity or organization, including a Governmental
Authority.
"PLAN AFFILIATE" means, with respect to any Person, any employee
benefit plan or arrangement sponsored by, maintained by or contributed to by
such Person, and with respect to any employee benefit plan or arrangement, any
Person sponsoring, maintaining or contributing to such plan or arrangement.
"PLAN OF REORGANIZATION" means the "Debtors' Third Amended Joint
Consolidated Plan of Reorganization," dated September 3, 1992, filed in the
Bankruptcy Cases.
"POST-CLOSING PERIOD" shall mean any Taxable period that begins
after the Closing Date.
"PRE-CLOSING PERIOD" shall mean any Taxable period that ends on or
before the Closing Date.
"PROCEEDING" means an action, suit, hearing, arbitration, proceeding
(public or private) or, to Seller's knowledge, governmental investigation, that
has been brought by or against any Governmental Authority or any other Person.
"PROHIBITED TRANSACTION" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"REFERENCE RATE" means LIBOR as in effect from time to time plus
1.00%. The party to whom interest is payable hereunder shall determine LIBOR for
successive one month periods until the obligation bearing interest is paid in
full.
"SELLER AFFILIATED GROUP" shall mean Seller and members of the
affiliated group, within the meaning of Section 1504 of the Code, of which
Seller is the common parent.
"SHARE ENCUMBRANCES" means, with respect to any of the Shares, any
lien, charge, claim, option, pledge, right of other parties, voting trust,
proxy, stockholder or similar agreement, restriction, adverse claim or any other
encumbrance of any nature whatsoever.
"STATEMENT OF ASSUMPTIONS" means the statement of assumptions
derived by Buyer from information made available to it in its due diligence
investigation of the Entertainment Companies prior to the date of this Agreement
that is attached as SCHEDULE 1.02 hereto.
"STRADDLE PERIOD" shall mean any Taxable period that begins before
and ends after the Closing Date.
8
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
as to which more than 10% of the outstanding stock having ordinary voting rights
or power (and excluding stock having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by such Person and/or
by one or more of such Person's Subsidiaries, and (ii) any partnership, joint
venture or other similar relationship between such Person (or any Subsidiary
thereof) and any other Person (whether pursuant to a written agreement or
otherwise), if such Person has a 10% or more equity interest therein.
"TAX" shall mean all federal, state, local and foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs, duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, irrespective of whether imposed directly or indirectly, as a successor
or transferee liability, as a joint and several liability pursuant to Section
1.1502-6 of the Treasury Regulations or comparable or similar provisions of
state, local or foreign law, or whether by reason of any tax sharing, tax
reimbursement or tax indemnification agreement, or by reason of a tax treaty.
"Taxes" and "Taxable" shall have the correlative meanings.
"TAX RETURN" means all returns, reports, statements, forms or other
materials or information required to be filed with respect to any Tax.
"UNION BANK LOAN" means the loan in the amount of Seven Million
Dollars ($7,000,000) from Union Bank of California on the Film entitled "Music
From Another Room" which is secured solely by the assets of such Film and which
is otherwise without recourse against any Entertainment Company.
1.02. INDEX OF OTHER DEFINED TERMS. In addition to those terms
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
DEFINED TERM SECTION
"1996 Balance Sheet" 3.09
"A Films" 3.20(a)
"Annual Statements" 3.09
"ASCAP" 3.20(g)
"B Films" 3.20(a)
"BMI" 3.20(g)
"Buyer" Preamble
"Closing" 2.02
"Closing Date" 2.02
"Commitment Fee" 10.03
"Development Projects" 3.22
9
DEFINED TERM SECTION
"Distributions" 3.10(h)
"Employment Agreements" 3.17(a)
"Entertainment Companies" Preamble
"Entertainment Plan" 3.17(c)
"Equity Securities" 3.01
"Essential Consents" 3.15(b)
"Film Rentals" 5.09
"Films In Progress" 3.21(a)
"Final Statement" 2.03(c)
"Financial Statements" 3.09
"Insurance Policies" 3.25
"Intellectual Property Rights" 3.19(b)
"Interim Statements" 3.09
"Landmark" Preamble
"Landmark Financial Statements" 3.29
"Leases" 3.11(c)
"Library Films" 3.20(a)
"Licensed Intellectual Property Rights" 3.19(b)
"MPAA" 3.20(b)
"Orion" Preamble
"Overpayment" 2.03(e)
"Owned Intellectual Property Rights" 3.19(a)
"P&A" 5.01(a)(ix)
"Permits" 3.15(a)
"Personal Property Leases" 3.11(c)
"Preliminary Purchase Price" 2.03(b)
"Preliminary Statement" 2.03(b)
"Proceedings" 3.13
"Pro Forma Statements" 3.09
"Purchase Price" 2.03(a)
"Real Property Leases" 3.11(c)
"Required Consents" 3.15(b)
"Required Contractual Consent" 3.15(b)
"Required Governmental Approval" 3.15(b)
"Scheduled Contracts" 3.14(a)
"SEC" 3.05
"SEC Documents" 3.27
"Section 338 Elections" 11.02(a)
"Section 338 Taxes" 11.02(c)
"Securities Act" 7.07(a)
"Selected Firm" 2.03(c)
"Seller" Preamble
"Seller Indemnitees" 9.02
10
DEFINED TERM SECTION
"Shares" Recitals
"Subsequent Material Contract" 5.01(b)(v)
"Tax Claim" 11.04(a)
"Tax Indemnitee" 11.04(a)
"Tax Indemnitor" 11.04(a)
"Unaffiliated Production Company" 3.21(b)
"Unpaid Balance" 2.03(d)
ARTICLE II
SALE OF STOCK
2.01. SALE OF STOCK. Upon the terms and subject to the conditions of
this Agreement and in reliance upon the representations, warranties and
agreements herein set forth, Buyer agrees to purchase from Seller and Seller
agrees to sell to Buyer all of the Shares on the Closing Date. At the Closing,
Seller shall deliver to Buyer a certificate evidencing the Shares duly endorsed
for transfer and with all transfer stamps attached and such other instruments as
may be reasonably requested by Buyer to transfer full legal and beneficial
ownership of the Shares to Buyer, free and clear of all Share Encumbrances.
2.02. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date
on which the last of the conditions to Closing set forth in Sections 8.01 and
8.02 have been satisfied or waived by the party or parties entitled to waive the
same or such other date as to which Buyer and Seller may agree (the "Closing
Date").
At the Closing, Buyer shall deliver to Seller the Purchase Price.
2.03. PURCHASE PRICE.
(a) As consideration for the Shares and the covenants and
agreements of Seller set forth herein, Buyer shall deliver to Seller at the
Closing in immediately available funds to be delivered by wire transfer (to a
bank account designated at least three business days prior to the Closing Date
in writing by Seller) an amount (the "Purchase Price") equal to Five Hundred
Seventy Three Million Dollars ($573,000,000) less the sum of: (i) the greater of
(A) all Debt and other amounts outstanding under the Existing Orion Credit
Facility on December 31, 1996, net of cash on hand of the Entertainment
Companies on December 31, 1996, or (B) all Debt and other amounts outstanding
under the Existing Orion Credit Facility on the Closing Date, net of cash on
hand of the Entertainment Companies on the Closing Date; plus (ii) unpaid
interest on Debt under the Existing Orion Credit Facility accrued to, but not
including, the Closing Date; plus (iii) the greater of (A) Thirteen Million
Dollars ($13,000,000) or (B) all Debt of the Entertainment Companies (other than
Debt outstanding under the Existing Orion Credit Facility on the Closing Date)
outstanding on the Closing Date; plus (iv) unpaid interest on such Debt (other
than the Existing Orion Credit Facility) accrued to, but not including, the
Closing Date.
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(b) Not later than three Business Days prior to the Closing
Date, Seller shall prepare and deliver to Buyer a statement (the "Preliminary
Statement") containing (i) a schedule of total Debt anticipated to be
outstanding on the Closing Date and an estimate of unpaid interest to be accrued
thereon as of the Closing Date and other amounts that then will be payable with
respect thereto, and (ii) an estimate of cash that would be reflected on a
consolidated balance sheet of Orion and its Subsidiaries prepared as of the
Closing Date (adjusted, if necessary, to give pro forma effect to distribution
to Seller of all capital stock of Landmark on the Closing Date). Based upon the
Preliminary Statement, a preliminary determination of the Purchase Price shall
be made (the "Preliminary Purchase Price"), which Preliminary Purchase Price
shall be subject to adjustment as provided in Sections 2.03(d) and (e).
(c) Within thirty (30) days after the Closing Date, Buyer
shall prepare and deliver to Seller a statement (the "Final Statement")
containing (i) a schedule of total Debt outstanding on the Closing Date and
accrued and unpaid interest thereon, and other amounts payable with respect
thereto, as of the Closing Date (assuming that such Debt was repaid in full on
that date), (ii) a calculation of cash on hand that would be reflected on a
consolidated balance sheet of Orion and its Subsidiaries prepared as of the
Closing Date (adjusted, if necessary, to give pro forma effect to distribution
to Seller of all capital stock of Landmark on the Closing Date), and (iii) a
calculation of the Purchase Price. The Final Statement and the calculation of
the Purchase Price shall be binding upon the parties to this Agreement unless
Seller gives written notice of disagreement therewith to Buyer within thirty
(30) days after its receipt of the Final Statement, specifying in reasonable
detail the nature and extent of such disagreement. If Buyer and Seller mutually
agree upon the Final Statement and the calculation of the Purchase Price within
thirty (30) days after Seller's receipt of such notice from Buyer, such
agreement shall be binding upon the parties to this Agreement. If Buyer and
Seller are unable to resolve any such disagreement within such period, the
disagreement shall be referred for final determination to an independent
accounting firm of national reputation selected by the mutual agreement of Buyer
and Seller (the "Selected Firm"), and the resolution of that disagreement and
the calculation of the total Debt, cash on hand resulting therefrom and the
Purchase Price shall be final and binding upon the parties hereto for purposes
of this Agreement. The fees and disbursements of the Selected Firm shall be paid
by Buyer and Seller as the Selected Firm shall determine based upon its
assessment of the relative merits of the positions taken by each in any
disagreement presented to such firm. Buyer will grant Seller full access to the
books and records of the Entertainment Companies and its relevant personnel in
order for it to make its evaluations under this Section 2.03.
(d) If the Preliminary Purchase Price is less than the
Purchase Price (such difference being referred to herein as the "Unpaid
Balance"), then, in addition to the amount payable to Seller under Section
2.01(a) of this Agreement, within five (5) Business Days after the final
determination of the Final Statement and the Purchase Price, Buyer shall deliver
to Seller an amount equal to the Unpaid Balance, together with interest thereon
at the Reference Rate in effect from time to time from the Closing Date until
the date of such payment, in cash in immediately available funds by wire
transfer to a bank account designated in writing by Seller prior to the due date
thereof.
(e) If the Preliminary Purchase Price is greater than the
Purchase Price (such difference being referred to herein as an "Overpayment"),
then within five (5) Business Days
12
after the final determination of the Final Statement and the Purchase Price,
Seller shall reimburse to Buyer an amount equal to the Overpayment, together
with interest thereon at the Reference Rate in effect from time to time from the
Closing Date until the date of such reimbursement, in cash in immediately
available funds by wire transfer to a bank account designated in writing by
Buyer prior to the due date thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.01. OWNERSHIP OF STOCK. Seller is the legal and beneficial owner of
all of the Shares, free and clear of all Share Encumbrances. The delivery to
Buyer of the Shares pursuant to the provisions of this Agreement will transfer
to Buyer valid title thereto, free and clear of any and all Share Encumbrances.
All of the Shares have been duly authorized and were validly issued and are
fully paid and nonassessable and were not issued in violation of any preemptive
rights. The Shares represent all of the issued and outstanding shares of capital
stock of Orion. There are not, and on the Closing Date there will not be,
outstanding (i) any options, warrants, rights of first refusal or other rights
to purchase from Seller or Orion any capital stock of Orion, (ii) any securities
convertible into or exchangeable for shares of such stock or (iii) any other
commitments of any kind for the issuance of additional shares of capital stock
or options, warrants or other securities of Orion (such options, warrants,
rights of first refusal or other rights, convertible securities, exchangeable
securities or other commitments are referred to herein collectively as "Equity
Securities"). There is no contract, right or option outstanding to require
Seller or Orion to redeem, purchase or otherwise reacquire any Equity Securities
of Orion, and there are no preemptive rights with respect to any Equity
Securities of Orion.
3.02. CORPORATE EXISTENCE AND POWER. Each of Seller and Orion is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation, and has all corporate power and
authority to enter this Agreement and consummate the transactions contemplated
hereby. Orion is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and could not reasonably be expected to be,
material.
3.03. CORPORATE AUTHORIZATION OF SELLER. This Agreement has been duly
and validly executed by Seller and constitutes the legal, valid and binding
agreement of Seller, enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally; PROVIDED,
HOWEVER, that the legality, validity, binding effect and enforceability of this
Agreement against Seller is not limited by the Bankruptcy Cases; and PROVIDED,
FURTHER, that the
13
consummation by Seller of the Closing and the transfer of the Shares are subject
to the approval of Seller's stockholders.
3.04. SUBSIDIARIES. SCHEDULE 3.04 sets forth a complete list of each
direct or indirect Subsidiary of Orion, its jurisdiction of organization, the
authorized capital stock of each such Subsidiary, the number of shares of
outstanding capital stock of each such Subsidiary and the owners thereof. All
such issued and outstanding shares of capital stock of each such Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable and
were not issued in violation of any preemptive rights. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all corporate power and all
material governmental licenses, governmental authorizations, governmental
consents and governmental approvals required to carry on the business as now
conducted by such Subsidiary and to own and operate the business as now owned
and operated by such Subsidiary. Except as disclosed in SCHEDULE 3.04, no
Subsidiary holds any of its issued and outstanding shares of capital stock in
its treasury, and there are not, and on the Closing Date there will not be,
outstanding any Equity Securities of or with respect to such Subsidiary. Except
as otherwise disclosed in SCHEDULE 3.04, Orion or a wholly-owned Subsidiary of
Orion owns, directly or indirectly, free and clear of all Share Encumbrances,
all of the outstanding capital stock or other Equity Securities of each of its
Subsidiaries identified in SCHEDULE 3.04. No Subsidiary is required to be
qualified to conduct business in any state other than: (a) the states set forth
in SCHEDULE 3.04, in which states the relevant Subsidiary is duly qualified and
in good standing, and (b) such states where the failure to be so qualified,
whether singly or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.05. ENTERTAINMENT GROUP. Other than the assets of Landmark
reflected in the Landmark Financial Statements, Orion and its Subsidiaries
together own all of the assets of the "Entertainment Group" as described in
Seller's most recent report filed with the Securities and Exchange Commission
(the "SEC") on Form 10-K.
3.06. CORPORATE AUTHORIZATION OF ORION. The execution, delivery and
performance by Orion of this Agreement and the consummation by Orion of the
transactions contemplated hereby are within Orion's corporate powers and have
been duly authorized by all necessary corporate action on the part of Orion.
This Agreement has been duly and validly executed by Orion and constitutes the
legal, valid and binding agreement of Orion, enforceable against it in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally; PROVIDED, HOWEVER, that the legality, validity, binding effect
and enforceability of this Agreement against Orion is not limited by the
Bankruptcy Cases.
3.07. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller and Orion of this Agreement requires no action by, consent
or approval of, or filing with, any Governmental Authority other than (a)
compliance with any applicable requirements of the HSR Act, (b) the filing of a
preliminary and definitive proxy statement with the SEC and (c) any actions,
consents, approvals or filings otherwise expressly referred to in Section 3.15
hereof.
14
3.08. NON-CONTRAVENTION. The execution, delivery and performance by
Seller and Orion of this Agreement, and consummation of the transactions
contemplated hereby, including without limitation, the transfer of the Shares to
Buyer, do not and will not (a) contravene or conflict with the articles or
certificate of incorporation or bylaws of Seller or any Entertainment Company,
true and correct copies of all of which have been delivered to Buyer by Seller;
(b) assuming receipt of the Required Consents, contravene or conflict with or
constitute a violation of any provision of any material Applicable Law binding
upon or applicable to Seller or any Entertainment Company; (c) except as set
forth on SCHEDULE 3.08(C), constitute a default under or give rise to any right
of termination, cancellation or acceleration of, or to a loss of any benefit to
which Seller or any Entertainment Company is entitled under, any material
Contract to which it is a party or any material Permit or similar authorization;
or (d) except as set forth on SCHEDULE 3.08(C), result in the creation or
imposition, under any Contract of any Entertainment Company or Applicable Law,
or any Lien on the Shares or on any asset of any Entertainment Company or of
Buyer or any Subsidiary of Buyer, or impose any contractual obligation or
restriction under such Contract on Buyer or any Subsidiary of Buyer (other than
Orion and its Subsidiaries).
3.09. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. SCHEDULE 3.09
contains true and complete copies of (i) the audited balance sheets and related
statements of operations and retained earnings and of cash flows for Orion and
its consolidated Subsidiaries for the years ended December 31, 1995 and December
31, 1996 (the "Annual Statements"), (ii) the pro forma balance sheets for Orion
and its consolidated Subsidiaries as at December 31, 1996 and March 31, 1997
(which March 31, 1997 balance sheet shall be delivered on or before May 8,
1997), adjusted to reflect distribution of the capital stock of Landmark to
Seller as if it had occurred on the date thereof (the "Pro Forma Statements")
and (iii) the balance sheets and related statements of operations for the three
month periods ended March 31, 1996 and March 31, 1997 which shall be delivered
on or before May 8, 1997 (collectively, the "Interim Statements" and, together
with the Annual Statements and the Pro Forma Statements, the "Financial
Statements"). The December 31, 1996 balance sheet referred to in clause (i)
above is referred to herein as the "1996 Balance Sheet." Each of the Financial
Statements has been prepared based on the books and records of Orion and its
Subsidiaries in accordance with GAAP and their normal accounting practices,
consistent with past practice and with each other, and present fairly the
financial condition, results of operations and cash flows of Orion and its
Subsidiaries as of the dates indicated or for the periods indicated, subject in
the case of the Interim Statements to normal year-end audit adjustments, which
adjustments in the aggregate are not material. The adjustments made to the
balance sheet included in the Annual Statements and Interim Statements in the
preparation of the Pro Forma Statements were reasonable in all material
respects. Except as set forth on SCHEDULE 3.09, there are no Liabilities of any
Entertainment Company other than: (i) any Liability accrued as a Liability on
the 1996 Balance Sheet; (ii) Liabilities specifically disclosed and identified
as such in the schedules to this Agreement; (iii) Liabilities incurred since the
date of the 1996 Balance Sheet that do not, and will not, individually or in the
aggregate, have a Material Adverse Effect; and (iv) Liabilities incurred since
the date of the 1996 Balance Sheet that have been incurred in the ordinary
course of business of any of the Entertainment Companies.
15
3.10. ABSENCE OF CERTAIN CHANGES. Since the date of the 1996 Balance
Sheet, each Entertainment Company has conducted its business in the ordinary
course consistent with past practice, and without limitation, there has not
been:
(a) any event, occurrence, development or state of
circumstances or facts or change in the assets, liabilities, business,
operations or financial conditions of any Entertainment Company that has had or
that could reasonably be expected to have, either alone or together with all
such events, occurrences, developments, states of circumstances or facts or
changes, a Material Adverse Effect;
(b) any incurrence, assumption or guarantee of any Debt by any
Entertainment Company other than drawdowns under the Existing Orion Credit
Facility and the Union Bank Loan;
(c) any creation, assumption or sufferance of the existence of
any Lien other than Permitted Liens created, assumed or suffered to exist in the
ordinary course of business consistent with past practice;
(d) any transaction or commitment made, or any Contract
entered into, by any Entertainment Company (including the acquisition or
disposition of any assets), or any waiver, amendment, termination or
cancellation of any Contract by any Entertainment Company, or any relinquishment
of any rights thereunder by any Entertainment Company, or of any other right or
debt owed to any Entertainment Company, other than in each such case actions
taken in the ordinary course of business consistent with past practice;
(e) except as set forth in SCHEDULE 3.10(E), any (i) grant of
any severance, continuation or termination pay to any director, officer,
stockholder or employee of any Entertainment Company or any Associate of any of
the foregoing, (ii) entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) with
any director, officer, stockholder or employee of any Entertainment Company or
any Associate of any of the foregoing, (iii) increase in benefits payable or
potentially payable under any severance, continuation or termination pay
policies or employment agreements with any director, officer, stockholder or
employee of any Entertainment Company or any Associate of any of the foregoing,
(iv) increase in compensation, bonus or other benefits payable or potentially
payable to directors, officers, stockholders or employees of any Entertainment
Company or any Associate of any of the foregoing, other than in the ordinary
course of business consistent with past practice or pursuant to existing
Contracts, or (v) change in the terms of any bonus, pension, insurance, health
or other Benefit Plan of Seller or any of its Affiliates applicable to any
Entertainment Company or of any Entertainment Company;
(f) any loan to or guarantee or assumption of any loan or
obligation on behalf of any stockholder, director, officer or employee of Seller
or any of its Affiliates or of any Associate of any of the foregoing, except
business expense advances to employees of any Entertainment Company occurring in
the ordinary course of business consistent with past practice;
16
(g) except as required by GAAP, any material change by any
Entertainment Company in its accounting principles, methods or practices or in
the manner it keeps its books and records or any material change by any
Entertainment Company of its current practices with regards to inventory, sales,
receivables, payables or accrued expenses which would affect the timing of
collection of receivables or the payment of payables;
(h) any distribution, dividend, bonus or other payment by any
Entertainment Company to Seller or any Affiliate of Seller (other than any
Entertainment Company) or any officer, director, stockholder or Affiliate of
Seller or any Entertainment Company or any of their respective Affiliates or
Associates (collectively, "Distributions"), except for the distribution of
Landmark as set forth in SCHEDULE 3.10(H) or occurring in the ordinary course of
business consistent with past practice;
(i) any payment, discharge or satisfaction of any Liabilities
of any Entertainment Company, other than payments, discharges or satisfactions
in the ordinary course of business consistent with past practice; or
(j) (i) any payment, discharge or other satisfaction of any
claim, liability or obligation owed to any Entertainment Company by Seller or
any of its Affiliates (other than any Entertainment Company) or owed to Seller
or any of its Affiliates (other than any Entertainment Company) by any
Entertainment Company or (ii) any prepayment of any Debt (other than payments of
revolving loans made under the Existing Orion Credit Facility).
3.11. PROPERTIES; LEASES; TANGIBLE ASSETS.
(a) Except for Permitted Liens and those Liens identified on
SCHEDULE 3.11(A), the Entertainment Companies own all of the assets (real,
personal or mixed, tangible or intangible (including the Intellectual Property
Rights)) reflected in the 1996 Balance Sheet (except those assets disposed of in
the ordinary course of business after the date thereof and the Films), free and
clear of all Liens.
(b) All tangible properties and assets (other than the Films)
and premises owned or leased by the Entertainment Companies are in good
condition and repair and are adequate in all material respects for the uses to
which they are put, and no tangible properties or assets necessary for the
conduct of the business of any Entertainment Company in substantially the same
manner as it has heretofore been conducted are in need of replacement,
maintenance or repairs, except for routine and not materially deferred
replacement, maintenance and repair.
(c) SCHEDULE 3.11(C) sets forth a true and complete list of
all material personal property leases (the "Personal Property Leases") and all
leases of real property (the "Real Property Leases" and collectively with the
Personal Property Leases, the "Leases") to which any Entertainment Company is a
party or by which any Entertainment Company is bound. With respect to the
Leases, except as set forth on SCHEDULE 3.11(C), there exist no defaults by any
Entertainment Company, or, to the knowledge of Seller, any default or threatened
default by any lessor or third party thereunder, that has affected or could
reasonably be expected to materially affect the rights and
17
privileges thereunder of any Entertainment Company. Assuming the Required
Consents are obtained, the sale of the Shares to Buyer will not adversely affect
any Leases with non-Affiliates to which any Entertainment Company is a party or
by which any Entertainment Company is bound.
(d) No real property is owned by any Entertainment Company
except as set forth on SCHEDULE 3.11(D).
3.12. AFFILIATES. Except as set forth in SCHEDULE 3.12, to the
knowledge of Seller, no stockholder of Seller or any officer or director of
Seller or any Entertainment Company (or any immediate family member of any such
officer or director):
(a) now has or at any time subsequent to January 1, 1996 had,
directly or indirectly, an equity interest in, or holds debt of, any Person
which furnishes or sells or during such period furnished or sold services or
products to any Entertainment Company or purchases or during such period
purchased from any Entertainment Company any goods or services, or otherwise
does or during such period did business with any Entertainment Company;
PROVIDED, HOWEVER, that no stockholder of Seller or any Entertainment Company or
any of their respective officers, directors or other Affiliates shall be deemed
to have such an interest (A) solely by virtue of the ownership of less than five
percent (5%) of the outstanding voting stock or debt securities of any publicly
held company, the stock or debt securities of which are traded on a national
stock exchange or quoted on the National Association of Securities Dealers
Automated Quotation System or (B) by reason of having such an interest in Seller
or such Entertainment Company; or
(b) now is or at any time subsequent to January 1, 1996 was,
directly or indirectly, a party to any contract, commitment or agreement to
which any Entertainment Company is or during such period was a party or under
which any Entertainment Company is or was obligated or bound or to which any
Entertainment Company's properties may be or may have been subject.
3.13. LITIGATION. Except as disclosed in SCHEDULE 3.13, (i) there are
no actions, claims, suits, hearings, arbitrations, proceedings (public or
private) or, to Seller's knowledge, governmental investigations, that have been
brought by or against any Governmental Authority or any other Person
(collectively, "Proceedings") pending or, to the knowledge of Seller,
threatened, against or by any Entertainment Company or against Seller with
respect to or relating to any Entertainment Company other than collection
actions by any Entertainment Company involving claims of amounts less than
Twenty Five Thousand Dollars ($25,000), or which seek to enjoin or rescind the
transactions contemplated by this Agreement or otherwise seek to prevent Seller
or any Entertainment Company from complying with the terms and provisions of
this Agreement, and (ii) there are no existing orders, judgments or decrees of
any Governmental Authority affecting any of the Entertainment Companies. All
matters identified on SCHEDULE 3.13 in the aggregate will not have a Material
Adverse Effect.
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3.14. CONTRACTS.
(a) SCHEDULE 3.14(A) sets forth a complete list of all
material Contracts (collectively with the Leases and the Employment Agreements,
the "Scheduled Contracts") including, without limitation:
(i) each Contract (other than License Agreements) between
any Entertainment Company and (A) except as disclosed in SCHEDULE 3.12 and
SCHEDULE 3.17(A), each present or former director, officer or other member
of management or other personnel of any Entertainment Company, (B) any
supplier of services or products (other than Films) to the Entertainment
Companies whose dollar volume of sales to the Entertainment Companies
taken as a whole exceeded in 1996 Five Hundred Thousand Dollars
($500,000), and (C) any Person in which the aggregate payments made to the
Entertainment Companies taken as a whole under such Contract exceeded in
1996 Five Hundred Thousand Dollars ($500,000);
(ii) each other agreement or arrangement of any
Entertainment Company that requires the payment or incurrence of
Liabilities, or the rendering of services, by any Entertainment Company,
subsequent to the date hereof of more than Five Hundred Thousand Dollars
($500,000) or that is reasonably expected to require payment of more than
Five Hundred Thousand Dollars ($500,000) in the aggregate;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, Debt or the deferred purchase
price of property (whether incurred, assumed, guaranteed or secured by any
asset);
(iv) all partnership, joint venture or other similar
Contracts, arrangements or agreements, excluding those Contracts which
relate to partnerships or joint ventures formed for the purpose of
producing one or more Films;
(v) all License Agreements to which any Entertainment
Company is a party or by which any Entertainment Company is otherwise
bound in which the aggregate payments to be made to or by any
Entertainment Company under such License Agreement subsequent to the date
hereof are more than Seven Hundred Fifty Thousand Dollars ($750,000) or
are reasonably expected to require payment of more than Seven Hundred
Fifty Thousand Dollars ($750,000) in the aggregate; and
(vi) all License Agreements or other Contracts that
constitute output deals or similar arrangements.
(b) Except as disclosed in SCHEDULE 3.14(B), each Scheduled
Contract relating to any Entertainment Company is a legal, valid and binding
obligation of each Entertainment Company that is party thereto and, to the
knowledge of Seller, each other party thereto, enforceable against each such
Entertainment Company that is party thereto and, to the knowledge of Seller,
each such other party thereto, in accordance with its terms, except to the
extent
19
that unenforceability would not adversely affect any Entertainment Company's
rights thereunder or as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and neither any Entertainment Company that is party thereto nor, to
the knowledge of Seller, any other party thereto, is in material default or has
failed to perform any material obligation thereunder. Complete and correct
copies of each Scheduled Contract have been delivered or made available to
Buyer. There is no default or failure to perform under other Contracts which
could reasonably be expected to have a Material Adverse Effect.
(c) Except as disclosed in SCHEDULE 3.14(C), each
Entertainment Company has paid all material Participations due and payable by it
as of the date hereof in accordance with past practice as such practice relates
to the timing of such payments, and no Entertainment Company is in default or
has failed to perform any obligation with respect to the payment of any such
material Participations.
3.15. PERMITS; REQUIRED CONSENTS.
(a) SCHEDULE 3.15(A) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
necessary for the operation of the Entertainment Companies in substantially the
same manner as currently operated or affecting or relating in any way to the
Entertainment Companies (the "Permits").
(b) SCHEDULE 3.15(B) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller or any Entertainment Company by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to avoid the loss of any material Permit or
otherwise, (ii) each Scheduled Contract with respect to which the consent of the
other party or parties thereto must be obtained by Seller or any Entertainment
Company by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the invalidity of
the transfer of such Contract, the termination thereof, a breach or default
thereunder or any other change or modification to the terms thereof (each, a
"Required Contractual Consent") and (iii) each Required Contractual Consent
which Seller and Buyer have mutually agreed is critical to the consummation of
the transactions contemplated hereby as set forth on SCHEDULE 3.15(B) (each, an
"Essential Consent" and collectively with the Required Governmental Approvals
and the Required Contractual Consents, the "Required Consents"). Except as set
forth in SCHEDULE 3.15(B), each Permit is valid and in full force and effect in
all material respects and, assuming the related Required Consents have been
obtained prior to the Closing, are or will be transferable by Seller, and
assuming the related Required Consents have been obtained prior to the Closing,
none of the Permits will be terminated or become terminable or impaired in any
material respect as a result of the transactions contemplated hereby. To the
knowledge of Seller, there are no facts relating to the identity or
circumstances of Seller that would prevent or materially delay obtaining any of
the Required Consents.
20
3.16. COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in SCHEDULE
3.16, the operation of the respective business of each Entertainment Company has
not violated or infringed, and does not violate or infringe, any Applicable Law
in a manner that could reasonably be expected to have, either alone or together
with all such violations or infringements, a Material Adverse Effect.
3.17. EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL; AND EMPLOYEE BENEFITS.
(a) Except as set forth on SCHEDULE 3.17(A), there are no
employment, consulting, severance pay, continuation pay, termination pay or
indemnification agreements or other similar agreements of any nature whatsoever
(collectively, "Employment Agreements") between or binding upon any
Entertainment Company, on the one hand, and any current or former stockholder,
officer, director, employee or Affiliate of any Entertainment Company or any of
their respective Associates or any consultant or agent of any Entertainment
Company, on the other hand, that are currently in effect other than any such
Employment Agreement that does not provide for the payment of more than One
Hundred Thousand Dollars ($100,000) in the aggregate in any year.
(b) Except as set forth on SCHEDULE 3.17(B), there are no
Employment Agreements or any other similar agreements to which any Entertainment
Company is a party or by which it is bound under which the transactions
contemplated by this Agreement (i) will require any payment by any Entertainment
Company or Buyer, or any consent or waiver from any stockholder, officer,
director, employee or Affiliate of any Entertainment Company or any of their
respective Associates or any consultant or agent of any Entertainment Company,
or Buyer or (ii) will result in any increase, acceleration, vesting or other
change in the compensation, benefits or other rights of any stockholder,
officer, director, employee or Affiliate of any Entertainment Company or any of
their respective Associates or any consultant or agent of any Entertainment
Company under any such Employment Agreement or other similar agreement.
(c) SCHEDULE 3.17(C) sets forth all Benefit Plans of Seller,
in which any employees or former employees and their beneficiaries of any
Entertainment Company participate ("Entertainment Plans"). Seller has made
available to Buyer true and correct copies of all governing instruments and
related agreements pertaining to such Entertainment Plans.
(d) Except as set forth in SCHEDULE 3.17(D), neither Seller
nor any Entertainment Company nor any Affiliate or ERISA Affiliate of Seller or
any Entertainment Company sponsors or has ever sponsored, maintained,
contributed to, or incurred an obligation to contribute to, any Employee Pension
Benefit Plan. In connection with any Employee Pension Benefit Plan currently
maintained by any Entertainment Company or any ERISA Affiliate, (i) there have
been no accumulated funding deficiencies (within the meaning of Code Section
412), whether or not waived, (ii) there have been no reportable events (within
the meaning of ERISA Section 4043(b)) other than any reportable event that may
arise in connection with the transactions contemplated by this Agreement, and
(iii) no circumstances exist that would warrant a termination of any such plan
by the Pension Benefit Guaranty Corporation pursuant to ERISA Section 4042. No
Employee Pension Benefit Plan has been terminated within the last five (5) years
in other than a standard termination under Section 4041(b) of ERISA and all
liabilities under such plans have
21
been adequately and properly discharged. The foregoing applies only to the
extent any of the events results in a material Liability of any Entertainment
Company.
(e) Except as set forth in SCHEDULE 3.17(E), neither Seller
nor any Entertainment Company nor any Affiliate or ERISA Affiliate of Seller or
any Entertainment Company sponsors or has ever sponsored, maintained,
contributed to, or incurred an obligation to contribute to any Multiemployer
Plan. Neither Seller nor any Entertainment Company nor any of their ERISA
Affiliates has at any time withdrawn from a Multiemployer Plan in a complete
withdrawal or a partial withdrawal, as such terms are defined in ERISA Sections
4203 and 4205, respectively, so as to result in any liability, contingent or
otherwise, to Seller, any Entertainment Company or any of their ERISA
Affiliates. All contributions required to be made by Seller, any Entertainment
Company or any of their ERISA Affiliates to each Multiemployer Plan have been
made when due. To the best knowledge of Seller, with respect to each
Multiemployer Plan, (i) no such plan has been terminated or has been in
reorganization under ERISA so as to result, directly or indirectly, in any
liability, contingent or otherwise, of Seller, any Entertainment Company or any
of their ERISA Affiliates under Title IV of ERISA; (ii) no proceeding has been
initiated by any Person (including the PBGC) to terminate any such plan; (iii)
Seller, any Entertainment Company and any of their ERISA Affiliates have no
reason to believe that any Multiemployer Plan will be terminated or reorganized;
and (iv) Seller, each Entertainment Company and their ERISA Affiliates do not
expect to withdraw from any Multiemployer Plan.
(f) Except as set forth in SCHEDULE 3.17(F), no agreement,
commitment or obligation exists to increase benefits under any Entertainment
Plan or to adopt any new Entertainment Plan. Further, no individual shall accrue
or receive additional benefits, service or accelerated rights to payments of
benefits under any Benefit Plan, including the right to receive any parachute
payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a direct result of the
transactions contemplated hereby, and neither Seller nor any Entertainment
Company is a party to any agreement or arrangement that could result in the
payment of any such benefits or payments.
(g) No Entertainment Plan has participated in, engaged in or
been a party to any non-exempt Prohibited Transaction, and none of Seller, any
Entertainment Company or any Affiliate or ERISA Affiliate of Seller or any
Entertainment Company has had asserted against it any material claim for taxes
under Chapter 43 of Subtitle A of the Code and Section 5000 of the Code, or for
material penalties under ERISA Section 502(c), (i) or (l), with respect to any
Employee Benefit Plan nor, to the knowledge of Seller, is there a material basis
for any such claim. No officer, director or employee of Seller or any
Entertainment Company has committed a material breach of any responsibility or
obligation imposed upon fiduciaries by Title I of ERISA with respect to any
Entertainment Plan, with respect to which breach Seller or any Entertainment
Company is or could be directly or indirectly liable.
(h) Other than routine claims for benefits, there is no claim
pending, or to the knowledge of Seller, threatened, involving any Entertainment
Plan by any Person against such plan or Entertainment Company. There is no
pending, or to the knowledge of Seller, threatened,
22
proceeding involving any Employee Benefit Plan before the IRS, the United States
Department of Labor or any other Governmental Authority that affects any
Entertainment Plan.
(i) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any
Entertainment Plan.
(j) Each Entertainment Plan has at all times prior hereto been
maintained in all material respects, by its terms and in operation, in
accordance with ERISA and the Code. Seller, each Entertainment Company and their
respective Affiliates and ERISA Affiliates have made full and timely payment of
all amounts required to be contributed under the terms of each Entertainment
Plan and Applicable Law or required to be paid as expenses under such
Entertainment Plan, and Seller and each Entertainment Company and their
respective Affiliates and ERISA Affiliates shall continue to do so through the
Closing. Each Entertainment Plan that is intended to be qualified under Section
401(a) of the Code is and has always been so qualified, and either has received
a favorable determination letter with respect to such qualified status from the
IRS or has filed a request for such a determination letter with the IRS within
the remedial amendment period such that such determination of qualified status
will apply from and after the effective date of any such Entertainment Plan.
(k) With respect to any Group Health Plans maintained by
Seller, any Entertainment Company or any Affiliates or ERISA Affiliates of
Seller or any Entertainment Company, whether or not for the benefit of the
employees of Seller, any Entertainment Company, Affiliates or its ERISA
Affiliates, Seller, the Entertainment Companies and their respective Affiliates
and ERISA Affiliates have complied in all material respects with the provisions
of Part 6 of Title I of ERISA and 4980B of the Code. No Entertainment Company is
obligated to provide health care benefits of any kind to any retired employees
pursuant to any Employee Benefit Plan, including without limitation any Group
Health Plan, or pursuant to any agreement or understanding, other than as
required by applicable law.
(l) Seller and the Entertainment Companies have made available
to Buyer a copy of the three (3) most recently filed Federal Form 5500 series
and accountant's opinion, if applicable, for each Entertainment Plan.
3.18. LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 3.18(A), no collective
bargaining agreement exists that is binding on any Entertainment Company and,
except as described on SCHEDULE 3.18(A), no petition has been filed or
proceedings instituted by an employee or group of employees with any labor
relations board seeking recognition of a bargaining representative at any time
subsequent to January 1, 1993. SCHEDULE 3.18(A) describes any organizational
effort currently being made or threatened by or on behalf of any labor union to
organize any employees of any Entertainment Company.
(b) Except as set forth on SCHEDULE 3.18(B), (i) there is no
labor strike, dispute, slow down or stoppage pending or, to the knowledge of
Seller, threatened, against or
23
directly affecting any Entertainment Company, (ii) no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is
pending, and no claims therefor exist, and (iii) no Entertainment Company nor
any Affiliate of any Entertainment Company has received any notice or has any
knowledge of any threatened labor, employment or civil rights dispute,
controversy or grievance or any other unfair labor practice proceeding or breach
of contract claim or action with respect to claims of, or obligations to, any
employee or group of employees of any Entertainment Company.
(c) Each of the Entertainment Companies has complied and are
currently complying, in respect of all employees of any Entertainment Company,
with any Applicable Law respecting employment and employment practices and the
protection of the health and safety of employees, from whatever source such law
may be derived, including, without limitation, statutes, ordinances, laws,
rules, regulations, policies, standards, judicial or administrative precedents,
judgments, orders, decrees, awards, citations, licenses, official
interpretations and guidelines, except for instances of noncompliance which
could not be reasonably expected to have, alone or in the aggregate, a Material
Adverse Effect.
(d) All individuals who are performing or have performed
services for any Entertainment Company or any Affiliate thereof and are or
during 1995 or 1996 were classified by any of the Entertainment Companies as
"independent contractors" qualify for such classification under Section 530 of
the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of 1986, as
applicable, except for such instances which are not, in the aggregate, material.
3.19. INTELLECTUAL PROPERTY.
(a) Other than copyright registrations, applications and
claims relating to the Films and common law trademark rights in the titles of
the Films, SCHEDULE 3.19(A) sets forth a complete and correct list of all (i)
foreign and United States federal and state patent, trademark, trade name,
service ▇▇▇▇ and copyright registrations, (ii) foreign and United States federal
and state patent, trademark, trade name, service ▇▇▇▇ and copyright applications
for registration, (iii) common law claims to trademarks, service marks and trade
names, (iv) claims of copyright which exist although no registrations have been
issued with respect thereto, (v) fictitious business name filings with any state
or local Governmental Authority and (vi) inventions, discoveries, concepts,
ideas, drawings, designs, original works of authorship, computer programs,
know-how, research and development, techniques, data, trade secrets and other
proprietary and intellectual property rights owned by any of the Entertainment
Companies (collectively, the "OWNED INTELLECTUAL PROPERTY RIGHTS").
(b) Other than copyright registrations, applications and
claims relating to the Films and common law trademark rights in the titles of
the Films, SCHEDULE 3.19(B) sets forth a complete and correct list of all (i)
foreign and United States federal and state patent, trademark, trade name,
service ▇▇▇▇ and copyright registrations, (ii) foreign and United States federal
and state patent, trademark, trade name, service ▇▇▇▇ and copyright applications
for registration, (iii) common law claims to trademarks, service marks and trade
names, (iv) claims of copyright which exist although no registrations have been
issued with respect thereto, (v) fictitious business name filings
24
with any state or local Governmental Authority and (vi) inventions, discoveries,
concepts, ideas, drawings, designs, original works of authorship, computer
programs, know-how, research and development, techniques, data, trade secrets
and other proprietary and intellectual property rights which any of the
Entertainment Companies has a valid license to use, including a description of
all Persons from whom any of the Entertainment Companies have obtained such
rights and the material terms of such licenses (collectively, the "LICENSED
INTELLECTUAL PROPERTY RIGHTS"). The Owned Intellectual Property Rights and the
Licensed Intellectual Property Rights are collectively referred to herein as the
"INTELLECTUAL PROPERTY RIGHTS."
(c) SCHEDULE 3.19(C) lists all licenses pursuant to which any
of the Entertainment Companies have licensed any Person to use any Intellectual
Property Rights. No Person is in default in any material respect with respect to
its obligations under any of the licenses set forth in SCHEDULE 3.19(C).
(d) Except as set forth in SCHEDULE 3.19(D), (i) no claim is
pending or, to Seller's knowledge, threatened to the effect that the present or
past use of the Intellectual Property Rights by any of the Entertainment
Companies infringes upon or conflicts with or violates any patent, patent
license, patent application, trademark, tradename, trademark or tradename
registration, copyright, copyright registration, service ▇▇▇▇ or any pending
application relating thereto, or any trade secret, know-how, program or process,
or common law rights in respect of any of the foregoing, or any similar rights,
of any Person, (ii) use, sale or licensing of the Intellectual Property Rights
by the relevant Entertainment Company does not infringe upon or violate any
rights of any other Person, (iii) to the knowledge of Seller, no Person is
infringing in any material respect upon the rights of any of the Entertainment
Companies in and to the Intellectual Property Rights and (iv) the Intellectual
Property Rights are not subject to any Lien other than Permitted Liens and Liens
granted in connection with the Existing Orion Credit Facility which shall be
extinguished on or before the Closing. Except as set forth on SCHEDULE 3.19(D),
no Intellectual Property Right of any of the Entertainment Companies is subject
to any outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof by the relevant Entertainment Company or, in the case of any
Intellectual Property Right licensed to others, restricting the sale, transfer,
assignment or licensing thereof by the relevant Entertainment Company to any
Person.
(e) Except for Participations or as set forth on SCHEDULE
3.19(E), no Entertainment Company is obligated to make royalty or other payments
to any owner of, licensor of, other claimant to, or any other Person regarding
any Intellectual Property Rights.
3.20. LIBRARY FILMS.
(a) OWNERSHIP. All Films set forth on SCHEDULE 3.20(A) are
designated therein as "A Films" and "B Films," and all of such A Films and B
Films shall be referred to collectively herein as the "Library Films." SCHEDULE
3.20(A)(I) identifies the availability dates of those A Films and B Films which
are currently being exploited by Seller, in each media, in the territories
indicated. SCHEDULE 3.20(A)(II) identifies all distribution rights owned or
controlled by the Entertainment Companies with respect to each Library Film.
SCHEDULE 3.20(A)(III) identifies all Films which Seller deems to be "dormant."
Except as set forth on SCHEDULE 3.20(A)(IV), the Library
25
Films are free and clear of all Liens other than Permitted Liens and Liens
disclosed on SCHEDULE 3.11(A).
(b) RATINGS. Except as disclosed in SCHEDULE 3.20(B), each A
Film that is a feature-length motion picture was produced in color on either
35MM or 70MM film, was submitted to the Motion Picture Association of America
("MPAA") for rating, was released theatrically in the United States with a
rating that is not more restrictive than the current rating equivalent to an "R"
under the present system or its equivalent rating under any successor system and
was produced primarily in the English language.
(c) ELEMENTS. SCHEDULE 3.20(C) identifies all available
Elements owned or controlled by the Entertainment Companies relating to the
Library Films listed therein. The Entertainment Companies have laboratory access
letters with respect to those Elements which the Entertainment Companies do not
own. With respect to each such Library Film identified, the Elements identified
are sufficient to produce copies, prints, video products and other reproductions
for exploitation in the theatrical, non-theatrical, television and video and
audio markets that are of such quality as is consistent with past practice of
the Entertainment Companies. SCHEDULE 3.20(C) identifies the correct
identification and location of each laboratory and other place which holds any
of the foregoing Elements relating to such Library Films.
(d) NO VIOLATION OF THIRD PARTY RIGHTS. No A Film, nor any B
Film that is currently being exploited by Seller, nor any part thereof, nor any
of the literary, dramatic or musical material contained therein or upon which
any such Film is based, nor the exercise by any authorized person or entity of
any right granted to any of the Entertainment Companies in connection therewith
will violate or infringe upon the trademark, service ▇▇▇▇, tradename, copyright,
literary, dramatic, music, artistic, personal, private, civil, contract or
property right or rights of privacy or any other right, whether tangible or
intangible, of any Person.
(e) CLEARANCES. The relevant Entertainment Company has
obtained proper and effective licenses or grants of authority to use the results
and proceeds of the services of performers and other Persons connected with the
production of the A Films to the extent reasonably necessary or desirable to
exercise all rights of such Entertainment Company therein.
(f) COPYRIGHTS. Except as specified on SCHEDULE 3.20(F), good
and sufficient copyright notice is affixed to each A Film. Except as set forth
in SCHEDULE 3.20(F), each A Film has been registered with the United States
Copyright Office.
(g) MUSIC. Except as set forth in SCHEDULE 3.20(G), all
non-dramatic music rights (so-called "small rights") contained in the A Films
are (i) available by license from American Society for Composers, Authors and
Publishers ("ASCAP"), Broadcast Music Inc. ("BMI") or SESAC, Inc., (ii) in the
public domain, or (iii) controlled by Orion or another Entertainment Company
directly or through licenses.
(h) CREDITS. The credits contained in the main and end
titles of the A Films comply in all material respects with all obligations with
respect thereto, including without
26
limitation, contractual obligations to third parties who rendered services in
connection with the A Films and all applicable guild agreements.
(i) INSURANCE CLAIMS. Except as set forth on SCHEDULE 3.20(I),
no insurance claims have been made and are currently outstanding and unsettled
as of the date of this Agreement on the producer's errors and omissions policies
that Orion or another Entertainment Company or any of its predecessors
maintained with respect to the A Films.
(j) RIGHTS. Except as set forth on SCHEDULE 3.20(J), which
Schedule sets forth any limitations out of the ordinary course with respect to
the use of performers' names and likenesses, editing rights and credit rights
and obligations with respect to the A Films, each relevant Entertainment Company
has, and has the right to grant to its Affiliates, agents, subdistributors and
licensees, the following rights on a non-exclusive basis to the extent
reasonably necessary or desirable to exploit the A Films:
(i) Use of Performers' Names: To disseminate,
reproduce, print and publish the name, likeness and biography of
each performer, director, producer, author and writer who rendered
services in or in connection with the production of each A Film, for
the purpose of advertising, promoting and exploiting such A Film,
except that no use may be made so as to indicate or imply that any
such person or performer is endorsing a commercial product or
service; and
(ii) Editing Rights: To make such cuts,
alterations, additions and variations of and in any part of the A
Films (including the dubbing-in of languages) as may be deemed
necessary or appropriate by such Entertainment Company in its sole
discretion excluding, however, any right to delete any logo,
copyright notice or credit other than such rights which would not
adversely impact the value of each such A Film.
(k) COMPLIANCE WITH SECTION 507. Each Entertainment Company
has conformed to the requirements of Section 507 of the Federal Communications
Act of 1934, as it may be amended or replaced in a more or less restrictive
version, concerning broadcast matter and disclosures required thereunder,
insofar as that section applies to persons furnishing program material for
television broadcasting. The following is an illustration of the parties'
understanding of Section 507, but in case of conflict the terms of Section 507
will control. The Library Films do not include any matter for which any money,
service or other valuable consideration is directly or indirectly paid, or
promised to, or charged or accepted by Seller or any Entertainment Company or to
Seller's knowledge by any producer or independent contractor connected with the
Library Films. As used in this paragraph, the term "service or other valuable
consideration" shall not include any service or property furnished without
charge or at a nominal charge for use in, or in connection with the Library
Films, "unless it is so furnished in consideration for an identification in a
broadcast of any person, product, service, trademark or brand name beyond an
identification which is reasonably related to the use of such service or
property on the broadcast," as such terms are used in said Section 507. The
provisions of this clause shall not apply to feature motion pictures produced
initially and primarily for theater exhibition to the extent the Federal
Communications Commission
27
continues to waive the requirements of Section 317(b) of the Communications Act
with respect to such motion pictures.
(l) SCHEDULE 3.20(L) sets forth all Participations as of March
31, 1997 with respect to each A Film.
3.21. FILMS IN PROGRESS.
(a) COSTS. SCHEDULE 3.21(A) sets forth for each Entertainment
Company a complete list of all Films currently in principal photography,
post-production or that have been completed but not delivered (collectively, the
"Films In Progress"), together with (i) a complete summary of all costs and
expenses paid by the relevant Entertainment Company in connection with each Film
In Progress to the date set forth therein, and (ii) Seller's good-faith estimate
of the cost to complete and deliver each Film In Progress.
(b) OWNERSHIP. Except as set forth on SCHEDULE 3.21(B), the
relevant Entertainment Company, or an unaffiliated production company from whom
an Entertainment Company has the right to acquire such rights pursuant to a
Contract disclosed on a schedule to this Agreement (an "Unaffiliated Production
Company"), owns all right, title and interest of every kind and nature,
worldwide, in all media, whether now known or hereafter devised, in and to the
Films In Progress. Except as set forth on SCHEDULE 3.21(B), the Films In
Progress are, or will be when acquired by any Entertainment Company, free and
clear of all Liens other than Permitted Liens and those Liens which are
customarily incurred in connection with production financing.
(c) RATINGS. Except as disclosed in SCHEDULE 3.21(C), each
Film In Progress that is a feature-length motion picture is being produced in
color on either 35MM or 70MM film, will be submitted to the MPAA for rating,
will be released theatrically in the United States with a rating that is not
more restrictive than the current rating equivalent to an "R" under the present
system or its equivalent rating under any successor system and is being produced
primarily in the English language.
(d) ELEMENTS. SCHEDULE 3.21(D) identifies all available
Elements owned or controlled by the Entertainment Companies relating to the
Films In Progress listed therein. The Entertainment Companies have laboratory
access letters with respect to those Elements which the Companies do not own.
With respect to each such Film In Progress identified, the Elements identified
are sufficient to produce copies, prints, video products and other reproductions
for exploitation in the theatrical, non-theatrical, television and video and
audio markets that are of such quality as is consistent with past practice of
the Entertainment Companies. SCHEDULE 3.21(D) sets forth the correct
identification and location of each laboratory and other place which holds any
of the foregoing Elements relating to such Films In Progress.
(e) INSURANCE POLICIES. The relevant Entertainment Company
or Unaffiliated Production Company has in effect errors and omissions insurance
coverage relating to each Film In Progress.
28
(f) COMPLETION BOND. The relevant Entertainment Company or
Unaffiliated Production Company has in effect a completion bond guaranteeing the
completion and delivery of each Film In Progress according to its terms.
(g) NO VIOLATION OF THIRD PARTY RIGHTS. No Film In Progress,
nor any part thereof, nor any of the literary, dramatic or musical material
contained therein or upon which any such Film In Progress is based, nor the
exercise by any authorized person or entity of any right granted to any of the
Entertainment Companies in connection therewith will violate or infringe upon
the trademark, service ▇▇▇▇, tradename, copyright, literary, dramatic, music,
artistic, personal, private, civil, contract or property right or rights of
privacy or any other right, whether tangible or intangible, of any Person.
(h) CLEARANCES. The relevant Entertainment Company or
Unaffiliated Production Company has obtained proper and effective licenses or
grants of authority to use the results and proceeds of the services of
performers and other Persons connected with the production of the Films In
Progress to the extent reasonably necessary or desirable to exercise all rights
of such Entertainment Company therein.
(i) COPYRIGHTS. Good and sufficient copyright notice will be
affixed to each Film In Progress in each case where such affixation is possible.
Except as set forth in SCHEDULE 3.21(I), all screenplay materials relating to
each Film In Progress have been registered with the United States Copyright
Office.
(j) MUSIC. Except as set forth in SCHEDULE 3.21(J), all
non-dramatic music rights (so-called "small rights") contained in the Films In
Progress are (i) available by license from ASCAP, BMI or SESAC, Inc., (ii) in
the public domain, or (iii) controlled by Orion or another Entertainment Company
directly or through licenses.
(k) CREDITS. The credits contained in the main and end titles
of the Films In Progress, if any, comply in all material respects with all
obligations with respect thereto, including without limitation, contractual
obligations to third parties who rendered services in connection with the Films
In Progress and all applicable guild agreements.
(l) INSURANCE CLAIMS. Except as set forth on SCHEDULE 3.21(L),
no insurance claims have been made and are currently outstanding and unsettled
as of the date of this Agreement on the producer's errors and omissions policies
that Orion or another Entertainment Company or any of its predecessors
maintained with respect to the Films In Progress.
(m) RIGHTS. Except as set forth in SCHEDULE 3.21(M), which
Schedule sets forth any limitations out of the ordinary course with respect to
the use of performers' names and likenesses, editing rights and credit rights
and obligations with respect to the Films In Progress, each relevant
Entertainment Company has, and has the right to grant to its Affiliates, agents,
subdistributors and licensees the following rights on a non-exclusive basis to
the extent reasonably necessary or desirable to exploit the Films In Progress:
29
(i) Use of Performers' Names: To disseminate, reproduce,
print and publish the name, likeness and biography of each performer,
director, producer, author and writer who rendered services in or in
connection with the production of each Film In Progress, for the purpose
of advertising, promoting and exploiting such Film In Progress, except
that no use may be made so as to indicate or imply that any such person or
performer is endorsing a commercial product or service; and
(ii) Editing Rights: To make such cuts, alterations,
additions and variations of and in any part of the Films In Progress
(including the dubbing-in of languages) as may be deemed necessary or
appropriate by the relevant Entertainment Company in its sole discretion
excluding, however, any right to delete any logo, copyright notice or
credit other than such rights which would not adversely impact the value
of each such Film In Progress.
(n) COMPLIANCE WITH SECTION 507. Each Entertainment Company
has conformed to the requirements of Section 507 of the Federal Communications
Act of 1934, as it may be amended or replaced in a more or less restrictive
version, concerning broadcast matter and disclosures required thereunder,
insofar as that section applies to persons furnishing program material for
television broadcasting. The following is an illustration of the parties'
understanding of Section 507, but in case of conflict the terms of Section 507
will control. The Films In Progress do not include any matter for which any
money, service or other valuable consideration is directly or indirectly paid,
or promised to, or charged or accepted by Seller or any Entertainment Company or
to Seller's knowledge by any producer or independent contractor connected with
the Films In Progress. As used in this paragraph, the term "service or other
valuable consideration" shall not include any service or property furnished
without charge or at a nominal charge for use in, or in connection with the
Films In Progress "unless it is so furnished in consideration for an
identification in a broadcast of any person, product, service, trademark or
brand name beyond an identification which is reasonably related to the use of
such service or property on the broadcast," as such terms are used in said
Section 507. The provisions of this clause shall not apply to feature motion
pictures produced initially and primarily for theater exhibition to the extent
the Federal Communications Commission continues to waive the requirements of
Section 317(b) of the Communications Act with respect to such motion pictures.
(o) SCHEDULE 3.21(O) identifies all Participations as of March
31, 1997 with respect to each Film In Progress.
3.22. DEVELOPMENT PROJECTS. SCHEDULE 3.22 identifies all projects in
development by or on behalf of each Entertainment Company (the "Development
Projects") and all material Contracts relating thereto. The relevant
Entertainment Company owns all right, title and interest in and to such
Development Projects to the extent described therein.
3.23. ADVISORY FEES. Except for ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation (whose fees and expenses will be paid by Seller), there
is no investment banker, broker, finder or other intermediary or advisor that
has been retained by or is authorized to act on behalf of Seller or any
Entertainment Company who might be entitled to any fee, commission or
30
reimbursement of expenses from Buyer or any of its Affiliates or any of their
respective Associates or any Entertainment Company upon consummation of the
transactions contemplated by this Agreement.
3.24. ENVIRONMENTAL COMPLIANCE.
(a) Except as disclosed in SCHEDULE 3.24(A), the Entertainment
Companies have obtained all approvals, authorizations, certificates, consents,
licenses, orders and permits or other similar authorizations of all Governmental
Authorities, or from any other Person, that are required under any Environmental
Law. SCHEDULE 3.24(A) also sets forth all permits, licenses and other
authorizations issued under any Environmental Law to any Entertainment Company.
(b) Except as disclosed in SCHEDULE 3.24(B), the Entertainment
Companies are in compliance in all material respects with all terms and
conditions of all approvals, authorizations, certificates, consents, licenses,
orders and permits or other similar authorizations of all Governmental
Authorities (and all other Persons) required under all Environmental Laws and
are in compliance in all material respects with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws.
(c) Except as disclosed in SCHEDULE 3.24(C), there are no past
or present events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans relating to or in any way affecting any
Entertainment Company that could reasonably be expected to interfere with or
prevent continued compliance with any Environmental Law by any Entertainment
Company or Buyer after the Closing, or that may give rise to any Environmental
Liability, or otherwise form the basis of any claim, action, demand, suit,
Proceeding, hearing, study or investigation (i) under any Environmental Law,
(ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any Hazardous Substance, or (iii) resulting from exposure
to workplace hazards.
3.25. INSURANCE. SCHEDULE 3.25 sets forth a complete and correct list
of all insurance policies of any kind or nature whatsoever currently in force or
in force at any time subsequent to January 1, 1995 with respect to the
Entertainment Companies (the "Insurance Policies"), including without limitation
all "occurrence based" liability policies, all errors and omissions policies and
all production package policies. For each Insurance Policy, SCHEDULE 3.25
indicates the type of coverage, the name of the insureds, the insurer, the
expiration date, the period to which it relates, the deductibles and loss
retention amounts and the amounts of coverage. The Insurance Policies described
as being material on SCHEDULE 3.25 and currently in effect are in full force and
effect and are valid, outstanding and enforceable, and all premiums due thereon
have been paid. Except as set forth on SCHEDULE 3.25, no insurance claims of
more than Fifty Thousand Dollars ($50,000) have been made and are currently
outstanding and unsettled.
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3.26. TAX MATTERS.
(a) Except as set forth on SCHEDULE 3.26, Seller and each
Entertainment Company (i) have accurately prepared and timely filed or caused to
be filed with the appropriate Tax authorities all material Tax Returns required
to have been filed by them under applicable law, and (ii) have paid or caused to
be paid to the appropriate Tax authorities all material Taxes required to have
been paid by them. No Tax liens or assessments have been filed by any Tax
authority against the Entertainment Companies or any of their properties or
assets.
(b) The Entertainment Companies are not and have not been
required to be included in any state, local or foreign combined, unitary or
consolidated Tax Return filed by Seller or any of Seller's Subsidiaries (other
than the Entertainment Companies).
3.27. SEC DOCUMENTS. Seller has made available to Buyer a true and
complete copy of each form, report, schedule, registration statement and
definitive proxy statement filed by Seller with the SEC since January 1, 1995
(as such documents have since the time of their filing been amended or
supplemented, the "SEC Documents"), which constitute all of the documents (other
than preliminary material) that Seller was required to file with the SEC since
such date.
3.28. DISCLOSURE. The Statement of Assumptions, taken as a whole, does
not contain an untrue statement of a material fact. None of (x) this Agreement
and the schedules (other than the Statement of Assumptions) delivered pursuant
hereto or certificates or other documents delivered to Buyer by or on behalf of
Seller or any Entertainment Company pursuant hereto, (y) any of the SEC
Documents or (z) any other document or written statement or other written
information which has been, or at any time prior to the Closing Date will be,
provided to Buyer by or on behalf of Seller or any Entertainment Company in
connection with this Agreement or the transactions contemplated hereby (taken as
a whole, with respect to such documents, statements or other information
relating to the same subject matter) contains or will contain an untrue
statement of a material fact or omits or will omit any information or statement
of a material fact necessary in order to make the information or statements
herein or therein not misleading. After reasonable investigation, including,
without limitation, consultation with the appropriate directors, officers and
employees of Seller and the Entertainment Companies, there is no fact or
condition within the knowledge of Seller which materially and adversely affects
the assets, liabilities, business, operations or financial condition of the
Entertainment Companies, taken as a whole, which has not been set forth in this
Agreement or any schedule hereto or certificate or other document delivered in
accordance with the terms hereof or any other written statement or other
document delivered to Buyer by or on behalf of Seller or any Entertainment
Company.
3.29. FINANCIAL STATEMENTS OF LANDMARK.
(a) SCHEDULE 3.29(A) sets forth true and complete copies of
the unaudited balance sheet and related statement of operations for Landmark for
the year ended December 31, 1996 and the three-month period ended March 31, 1997
(the "Landmark Financial Statements"). The Landmark Financial Statements have
been prepared based on the books and records of Landmark in accordance with GAAP
and its normal accounting practices, consistent with past
32
practice, and present fairly the financial condition and results of operations
of Landmark as of the date and for the periods indicated, subject to normal
year-end adjustments.
(b) Since December 31, 1996, no Entertainment Company has
transferred any asset or property to Landmark (whether in payment of
indebtedness, as a contribution to capital or otherwise) except for (i)
transfers of cash to Landmark in the ordinary course of business in an aggregate
amount (net of cash returned to the Entertainment Companies) not exceeding Three
Million Dollars ($3,000,000) and (ii) transfer of those assets identified in
SCHEDULE 3.29(B).
3.30. NO CONTRACT WITH LANDMARK. Except as set forth on SCHEDULE 3.30,
none of the Entertainment Companies is a party to or is bound by any Contract
with Landmark other than exhibition contracts with Orion negotiated on an
arms-length film-by-film basis relating to Films the theatrical distribution
rights to which are owned or controlled by Orion.
3.31. BOARD RECOMMENDATIONS. By the unanimous vote of the directors
present at a meeting of Seller's Board of Directors (which meeting was duly
called and held and at which a quorum was present), the Board of Directors of
Seller (a) duly and validly approved this Agreement and the transactions
contemplated hereby, and (b) resolved to recommend approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of
Seller. Seller's financial advisor, ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities
Corporation, has delivered to Seller's Board of Directors an oral opinion on the
date hereof (and has committed to deliver a written opinion not later than ten
(10) days after the date hereof) to the effect that on such date, the Purchase
Price is fair to Seller's stockholders from a financial point of view.
3.32. BANKRUPTCY.
(a) On or about November 5, 1992, all property of the
bankruptcy estate of each Entertainment Company that was a debtor in the
Bankruptcy Cases revested in such Entertainment Company.
(b) The use, sale or lease of property of each Entertainment
Company, whether or not such use, sale or lease is in the ordinary course of its
business and consistent with past practice, does not require any notice to or
approval of the Bankruptcy Court, the United States Trustee or any committee of
creditors or other representative of creditors appointed in the Bankruptcy Cases
or pursuant to the Confirmation Documents.
(c) Except for the claims set forth on SCHEDULE 3.32(C), all
claims of the creditors of each Entertainment Company that arose prior to the
effective date of the Plan of Reorganization (as defined therein) have been paid
in full or otherwise fully satisfied in accordance with the terms of the
Confirmation Documents.
33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer hereby represents and
warrants to Seller that:
4.01. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate power to carry out its business as now
conducted. Buyer is duly qualified to do business as a foreign corporation in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and could not reasonably be expected to be,
material.
4.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. This Agreement has
been duly and validly executed by Buyer and constitutes the legal, valid and
binding agreement thereof, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement require no action by, consent or approval
of, or filing with, any Governmental Authority other than (i) compliance with
any applicable requirements of the HSR Act or (ii) any actions, consents,
approvals or filings otherwise expressly referred to in this Agreement.
4.04. NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement, and consummation of the transactions contemplated
hereby, do not and will not (a) contravene or conflict with the articles or
certificate of incorporation or bylaws of Buyer, true and correct copies of all
of which have been delivered to Seller by Buyer; (b) contravene or conflict with
or constitute a violation of any provision of any material Applicable Law
binding upon or applicable to Buyer; (c) constitute a default under any material
contract, agreement or understanding to which Buyer is a party or any material
authorization, license or permit of any Governmental Authority; or (d) result in
the creation or imposition of any Lien on the assets of Buyer.
4.05. ADVISORY FEES. Except for ▇.▇. ▇▇▇▇▇▇ & Co., Inc. (whose fees
and expenses will be paid by Buyer), there is no investment banker, broker,
finder or other intermediary or advisor that has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee,
commission or reimbursement of expenses from Seller or any of their respective
Affiliates or Associates upon consummation of the transactions contemplated by
this Agreement.
4.06. LITIGATION. There is no Proceeding pending against, or to the
knowledge of Buyer, threatened against or affecting, Buyer before any court or
arbitrators or any governmental
34
body, agency or official that in any matter challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement.
4.07. PURCHASE FOR INVESTMENT. Buyer will acquire the Shares solely
for its own account for investment and not with a view toward any resale or
distribution thereof. Buyer agrees that the Shares may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act of 1993, as amended, except pursuant to an
exemption from such registration available under such Act, and without
compliance with foreign securities laws, in each case, to the extent applicable.
Buyer has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of its purchase of the Shares.
Buyer confirms that Seller has made available to Buyer the opportunity to ask
questions of the officers and management employees of the Entertainment
Companies and to acquire additional information about the business and financial
condition of the Entertainment Companies.
4.08. OWNERSHIP OF MGM. Buyer owns all of the issued and outstanding
capital stock of Metro-▇▇▇▇▇▇▇-▇▇▇▇▇ Inc., a Delaware corporation.
ARTICLE V
COVENANTS OF SELLER AND ORION
Each of Seller and Orion hereby agree that:
5.01. CONDUCT OF THE BUSINESS. From the date hereof until the Closing
Date, it shall cause each Entertainment Company to conduct its business
operations in the ordinary course of business consistent with past practice.
Without limiting the generality of this Section 5.01, from the date hereof until
the Closing Date:
(a) Seller and Orion, as applicable, will:
(i) (A) cause each Entertainment Company to maintain its
assets in the ordinary course of business consistent with past practice in
good operating order and condition, reasonable wear and tear, damage by
fire and other casualty excepted, other than through the transfer of all
of the issued and outstanding capital stock of Landmark to an Affiliate of
Seller that is not an Entertainment Company, (B) promptly repair, restore
or replace assets in the ordinary course of business consistent with past
practice, and (C) upon any damage, destruction or loss to any of its
assets, apply any and all insurance proceeds received with respect thereto
to the prompt repair, replacement and restoration thereof to the condition
of its assets before such event;
(ii) cause each of the Entertainment Companies to comply
with all Applicable Laws;
(iii) file all foreign, Federal, state and local Tax Returns
required to be filed and make timely payment of all applicable Taxes when
due;
35
(iv) use reasonable commercial efforts to obtain, prior to
the Closing Date, all Required Consents;
(v) cause each of the Entertainment Companies to take all
reasonable actions necessary to be in compliance with, and to maintain the
effectiveness of, all material Permits;
(vi) promptly notify Buyer in writing of any action, event,
condition or circumstance, or group of actions, events, conditions or
circumstances, that results in, or could reasonably be expected to result
in, a Material Adverse Effect, other than changes in general economic
conditions;
(vii) promptly notify Buyer in writing of the commencement of
any Proceeding by or against Seller which relates to this Agreement or any
of the Entertainment Companies or by or against any Entertainment Company,
or Seller becoming aware of any threat, claim, action, suit, inquiry,
proceeding, notice of violation, demand letter, subpoena, government audit
or disallowance that could reasonably be expected to result in such a
Proceeding;
(viii) promptly notify Buyer in writing of the occurrence of
any breach by Seller of any representation or warranty, or by Seller or
Orion of any covenant or agreement, contained in this Agreement; and
(ix) cause each Entertainment Company to continue to make
expenditures as required by and in accordance with the budget for each
Film In Progress including, without limitation, all such expenditures
required for prints and advertising ("P&A"), as contained in SCHEDULE
5.01(A)(IX).
(b) without Buyer's prior written consent, Seller and Orion
will not permit any Entertainment Company to:
(i) purchase or otherwise acquire assets from any other
Person other than in the ordinary course of business consistent with past
practice;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber any of its assets other than
in the ordinary course of business consistent with past practice or
pursuant to existing obligations of Seller as set forth in SCHEDULE
3.11(A);
(iii) make or commit to make any expenditures of amounts in
excess of the amounts set forth on SCHEDULE 5.01(A)(IX) with respect to
each Film In Progress including the budgeted expenditures for P&A;
PROVIDED, HOWEVER, that the amount expended for P&A may be increased above
that budgeted in the event Buyer provides all of such excess amounts;
36
(iv) enter any agreement or arrangement that requires or
allows payment, acceleration of payment or incurrence of Liabilities, or
the rendering of services by any Entertainment Company outside the
ordinary course of business or unless expressly contemplated by the terms
of this Agreement;
(v) enter into, amend or modify in any material respect or
terminate any Scheduled Contract or any other Contract entered into by any
Entertainment Company after the date hereof which, if in existence on the
date hereof, would be required to be set forth in SCHEDULE 3.14(A) as a
Scheduled Contract (each, a "Subsequent Material Contract");
(vi) except in the ordinary course of business, waive,
cancel or take any other action materially impairing any of its rights;
(vii) make or commit to make any capital expenditure (other
than capital expenditures expressly required under any Scheduled Contract)
if, after giving effect thereto, the aggregate of capital expenditures
made or committed to be made after the date of this Agreement would exceed
Two Hundred Fifty Thousand Dollars ($250,000);
(viii) enter into or commit or propose to enter into any
Subsequent Material Contract;
(ix) (A) create, incur, assume, or guarantee any
indebtedness for borrowed money other than drawdowns under the Existing
Orion Credit Facility or the Union Bank Loan or (B) incur any Liability
relating to a documentary or standby letter of credit, other than in each
such case referred to in this clause (ix) in the ordinary course of
business where the aggregate dollar amount of all of the foregoing by the
Entertainment Companies does not exceed Fifty Thousand Dollars ($50,000);
(x) (A) increase the rate or terms of compensation payable
or to become payable to its directors, officers or employees except in the
ordinary course of business consistent with past practice, (B) pay or
agree to pay any pension, retirement allowance or other employee benefit
not provided for by any Employee Benefit Plan, Benefit Arrangement or
Employment Agreement set forth in the schedules hereto, (C) commit itself
to any additional pension, profit sharing, bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, continuation pay, termination pay,
retirement or other employee benefit plan, agreement or arrangement, or
increase the rate or terms of any Employee Benefit Plan or Benefit
Arrangement, (D) enter into any employment agreement with or for the
benefit of any Person, or (E) increase the rate of compensation under or
otherwise change the terms of any Employment Agreement identified in
SCHEDULE 3.17(A);
(xi) make any change in its accounting methods or in the
manner of keeping its books and records or any change in its current
practices with respect to inventory, sales, receivables, payables or
accrued expenses, except as required by GAAP;
37
(xii) declare or pay any dividend or make any distribution in
respect of any of its capital stock, options, warrants, rights of first
refusal or other rights to purchase capital stock of any Entertainment
Company or, directly or indirectly, redeem, purchase or otherwise acquire
any of its Equity Securities or the Equity Securities of any of its
Affiliates or make any other payments of any kind to the holders of any of
its Equity Securities in respect thereof or to the holders of any Equity
Securities of any of its Affiliates in respect thereof, or enter into any
commitment agreement to do any of the foregoing other than the dividend or
distribution of the capital stock of Landmark;
(xiii) amend its charter or Bylaws;
(xiv) organize any new Subsidiary or acquire any capital
stock or other equity securities or ownership interest of any corporation
or business entity;
(xv) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction for fair and equivalent value in the
ordinary course of business consistent with past practice of liabilities
or obligations reflected or reserved against in the 1996 Balance Sheet or
incurred in the ordinary course of business since the date of the 1996
Balance Sheet;
(xvi) (A) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, contingent or otherwise) owed to any
Entertainment Company by Seller or any of its Affiliates (other than any
Entertainment Company) or owed to Seller or any of its Affiliates (other
than any Entertainment Company) by any Entertainment Company or (B) prepay
any Debt (other than payments of revolving loans made under the Existing
Orion Credit Facility);
(xvii) write down the value of any inventory or write-off as
uncollectible any notes or accounts receivable, except for write-downs and
write-offs in accordance with GAAP and in the ordinary course of business
consistent with past practice which are not material to the Entertainment
Companies, taken as a whole;
(xviii) dispose of or permit to lapse any rights to the use of
any Intellectual Property Rights or dispose of or disclose any
Intellectual Property Rights not a matter of public knowledge other than
in the ordinary course of business consistent with past practice and which
collectively are not material to the business of the Entertainment
Companies, taken as a whole; or
(xix) merge or consolidate with any other corporation,
acquire control of all or substantially all of the assets of any other
corporation or business entity, or take any steps incident to, or in
furtherance of, any of such actions, whether by entering into an agreement
or otherwise.
5.02. ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, from the date of this Agreement until Closing, Seller and Orion will
promptly: (a) give Buyer and its
38
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records of each
Entertainment Company upon reasonable prior notice in order to conduct its due
diligence investigation of the Entertainment Companies, (b) furnish to Buyer,
its counsel, financial advisors, auditors and other authorized representatives
such information relating to the Entertainment Companies as Buyer may reasonably
request in order to conduct its due diligence investigation of the Entertainment
Companies, and (c) instruct the directors, officers, employees, counsel,
auditors and financial advisors of each Entertainment Company to cooperate with
Buyer and its counsel, financial advisors, auditors and other authorized
representatives in their due diligence investigation of the Entertainment
Companies and their preparation of all necessary certificates or similar
documents required to be prepared and delivered by Buyer to Seller pursuant to
this Agreement.
5.03. COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVALS AND
REQUIRED CONTRACTUAL CONSENTS. On and after the Closing Date, Seller shall
comply at its own expense with all conditions and requirements set forth in (i)
all Required Governmental Approvals as necessary to keep the same in full force
and effect assuming continued compliance with the terms thereof by Buyer and
(ii) all Required Contractual Consents and Essential Consents as necessary to
keep the same effective and enforceable against the Persons giving such Required
Contractual Consents and Essential Consents assuming continued compliance with
the terms thereof by Buyer.
5.04. MAINTENANCE OF INSURANCE POLICIES. On and after the date hereof
(including after the Closing Date), neither Seller nor Orion shall take or fail
to take or permit any Entertainment Company to fail to take any action if such
action or inaction, as the case may be, would adversely affect the applicability
of any insurance in effect on the date hereof that covers all or any part of the
assets of any Entertainment Company. Notwithstanding the foregoing, Seller shall
not have any obligation to make any monetary payment to maintain the
effectiveness of any such insurance policy after the Closing Date.
5.05. CONFIDENTIALITY.
(a) Seller and Orion will, and will cause their
representatives to, treat any data and information obtained with respect to
Buyer or any of its Affiliates from any representative, officer, director, or
employee of Buyer, or from any books or records of Buyer in connection with this
Agreement, confidentially and with commercially reasonable care and discretion,
and will not disclose any such information to third parties; PROVIDED, HOWEVER,
that the foregoing shall not apply to (i) information in the public domain or
that becomes public through disclosure by any party other than Seller or any
Affiliate or representative of Seller or any such Affiliate, so long as such
other party is not in breach of a confidentiality obligation, (ii) information
that may be required to be disclosed by Applicable Law or (iii) information
required to be disclosed to obtain any Required Consents.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Seller and Orion, upon the written request of Buyer,
will, and will cause their respective representatives to, promptly deliver to
Buyer any and all documents or other materials furnished by Buyer or any of its
Affiliates to Seller or Orion in connection with this Agreement without
retaining
39
any copy thereof. In the event of such request, all other documents, whether
analyses, compilations or studies, that contain or otherwise reflect the
information furnished by Buyer to Seller or Orion, shall be destroyed by Seller
or Orion or shall be returned to Buyer, and Seller or Orion, as the case may be,
shall confirm to Buyer in writing that all such materials have been returned or
destroyed. No failure or delay by Buyer in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
(c) From and after the Closing, Seller will, and will cause
its Subsidiaries and the representatives of Seller and its Subsidiaries to,
treat any data and information obtained with respect to any Entertainment
Company from any representative, officer, director, or employee of Seller or any
Entertainment Company, or from any books or records of Seller or any
Entertainment Company (whether or not obtained in connection with this
Agreement) confidentially and with commercially reasonable care and discretion,
and will not disclose any such information to third parties; PROVIDED, HOWEVER,
that the foregoing shall not apply to (i) information in the public domain or
that becomes public through disclosure by any party other than Seller or any
Affiliate of Seller or representative of Seller or any such Affiliate, so long
as such other party is not in breach of a confidentiality obligation, (ii)
information that may be required to be disclosed by the rules of the American
Stock Exchange, Inc. or Applicable Law, or (iii) information required to be
disclosed to obtain any Required Consents. To the extent permitted by the terms
of any confidentiality agreements to which Seller or any of its Affiliates
(other than any Entertainment Company) is a party relating to any of the
Entertainment Companies or their respective businesses, Seller will assign to
Buyer at Closing all right, title and interest of Seller under such
confidentiality agreements.
To the extent that Seller or any such Affiliate is prohibited from assigning
any of its right, title and interest under any such confidentiality agreement by
the terms thereof, Seller or such Affiliate shall use its reasonable commercial
efforts to enforce its rights and remedies thereunder, and Buyer agrees to
advance Seller or such Affiliate for all actual out-of-pocket expenses incurred
in connection with or arising out of such enforcement (including, without
limitation, reasonable attorneys' fees and costs), if Buyer shall provide Seller
with an indemnification agreement reasonably acceptable to Seller that
indemnifies Seller from and against all counterclaims asserted or other losses
incurred by Seller as a result of such attempted enforcement of rights or
assertion of remedies thereunder.
5.06. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that in the event of a breach by Seller or Orion of this Article V, money
damages would not be an adequate remedy to Buyer or its Affiliates for such
breach and, even if money damages were adequate, it would be impossible to
ascertain or measure with any degree of accuracy the damages sustained by Buyer
or its Affiliates therefrom. Accordingly, if there should be a breach or
threatened breach by Seller or Orion of provisions of this Article V, Buyer and
its Affiliates shall be entitled to an injunction restraining Seller and Orion
from any breach without showing or proving actual damage sustained by Buyer or
its Affiliates, as the case may be. Nothing in the preceding sentence shall
limit or otherwise affect any remedies that Buyer may otherwise have under
Applicable Law.
5.07. BANKRUPTCY CASES. Between the date hereof and the Closing Date,
Seller and Orion shall use commercially reasonable efforts to have the
Bankruptcy Cases closed in
40
conformity with Applicable Law (it being understood that this covenant shall not
be a condition to Closing).
5.08. NO SOLICITATIONS. From and after the date hereof, Seller,
without the prior written consent of Buyer, will not, and will not authorize any
of its or any of its Subsidiaries' officers, employees, directors, stockholders
or other representatives to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate knowingly any inquiries or the making of any proposal that
constitutes or could be reasonably expected to lead to an Alternative Proposal
from any Person, or engage in any discussions or negotiations relating thereto
or accept any Alternative Proposal or make or authorize any statement,
recommendation or solicitation in support of any Alternative Proposal; PROVIDED,
HOWEVER, that notwithstanding any other provision hereof, Seller may (a) at any
time prior to the ▇▇▇▇ ▇▇▇▇▇▇'▇ stockholders shall have voted to approve this
Agreement and the transactions contemplated hereby, engage in discussions or
negotiations with a third party who (without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or with
Seller or any of its Subsidiaries or any officer, employee, director,
stockholder or other representative of Seller or any of its Subsidiaries after
the date hereof) seeks to initiate such discussions or negotiations and may
furnish such third party information concerning the Entertainment Companies if,
and only to the extent that, (i) (x) such third party has first made, after the
date hereof, an Alternative Proposal in writing the terms of which reflect a
superior transaction than the transactions contemplated by this Agreement and
has demonstrated that the funds necessary for the Alternative Proposal are
reasonably likely to be available (as determined in good faith in each case by
Seller's Board of Directors after consultation with its financial advisors) and
(y) Seller's Board of Directors shall have determined in good faith, on the
basis of advice of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other outside
counsel of similar stature, that such action is necessary for the Board of
Directors to comply with its fiduciary duties to stockholders under Applicable
Law and (ii) prior to furnishing information to or entering into discussions or
negotiations with such Person, Seller receives from such Person an executed
confidentiality agreement in reasonably customary form and containing terms not
in the aggregate materially more favorable to such Person than the terms
contained in Section 6.02 or in any confidentiality agreement previously
executed by Seller and Buyer or any of its Subsidiaries; or (b) comply with Rule
14e-2 promulgated under the Securities and Exchange Act of 1934 with regard to a
tender or exchange offer. Seller shall immediately cease and terminate any
existing solicitation, initiation, engagement, activity, discussion or
negotiation with any Persons conducted heretofore by Seller or any officer,
employee, director, stockholder or other representative of Seller or any of its
Subsidiaries with respect to the foregoing. Seller shall not release any third
party from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another Person who has
made, or who may reasonably be considered likely to make, an Alternative
Proposal, unless its Board of Directors shall determine in good faith, on the
basis of the advice of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other outside
counsel of similar stature, that such action is necessary for the Board of
Directors to comply with its fiduciary duties to stockholders under Applicable
Law. Seller shall notify Buyer orally and in writing of any such inquiries (that
are or appear to be serious or legitimate), offers or proposals (including the
terms and conditions of any such offer or proposal, the identity of the Person
making it and a copy of any
41
written Alternative Proposal), as promptly as practicable and in any event
within forty-eight (48) hours after the receipt thereof, shall keep Buyer
informed of the status and details of any such inquiry, offer or proposal, and
shall give Buyer five (5) days advance written notice of any agreement to be
entered into with, or any information to be supplied to, any Person making such
inquiry, offer or proposal.
5.09. TRANSFER OF ASSETS. Between the date hereof and the Closing
Date, neither Orion nor any other Entertainment Company will transfer to
Landmark any assets of Orion or any other Entertainment Company other than (a)
transfers of cash to Landmark in the ordinary course of business consistent with
past practice in an aggregate amount (net of cash returned to the Entertainment
Companies) not exceeding Five Million Dollars ($5,000,000) as long as all such
amounts are funded from the Existing Orion Credit Facility (and Seller shall
provide Buyer with reasonably satisfactory evidence of such funding upon Buyer's
request) and (b) transfer of those assets identified in SCHEDULE 3.29(B).
Immediately prior to the Closing, Seller and Orion will cause (i) Landmark to
offset against any amounts owing by Landmark to any Entertainment Company any
amounts owed by Landmark to such Entertainment Company (other than Film rentals
payable by Landmark with respect to the theatrical exhibition of Films ("Film
Rentals")), and (ii) any balance owed to Landmark by any Entertainment Company
shall be forgiven and any balance owed by Landmark to any Entertainment Company
shall be contributed to the capital of Landmark. Since December 31, 1996,
Landmark has paid, and between the date hereof and the Closing Date Landmark
will pay, Film Rentals only in the ordinary course of business consistent with
past practice.
5.10. USE OF TRADE NAMES. From and after the Closing, neither Seller
nor any Affiliate of Seller shall use the tradename of any Entertainment Company
in the conduct of Seller's or such Affiliate's business without Buyer's prior
written consent.
ARTICLE VI
COVENANTS OF BUYER
6.01. COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVALS AND
REQUIRED CONTRACTUAL CONSENTS. On and after the Closing Date, Buyer shall comply
at its own expense with all conditions and requirements set forth in (i) all
Required Governmental Approvals as necessary to keep the same in full force and
effect assuming continued compliance with the terms thereof by Seller and (ii)
all Required Contractual Consents as necessary to keep the same effective and
enforceable against the Persons giving such Required Contractual Consents
assuming continued compliance with the terms thereof by Seller.
6.02. CONFIDENTIALITY.
(a) Buyer will, and will cause its representatives to, treat
any data and information obtained with respect to Seller from any
representative, officer, director or employee of Seller, or from any books or
records of Seller in connection with this Agreement, confidentially and with
commercially reasonable care and discretion, and will not disclose any such
information
42
to third parties; PROVIDED, HOWEVER, that the foregoing shall not apply to (i)
information in the public domain or that becomes public through disclosure by
any party other than Buyer, or its Affiliates or representatives, so long as
such other party is not in breach of a confidentiality obligation, (ii)
information that may be required to be disclosed by Applicable Law, (iii)
information required to be disclosed to obtain any Required Consents, or (iv)
any information that is disclosed by Buyer or its Affiliates to any of their
actual or prospective lenders or investors in connection with financing the
transactions contemplated by this Agreement.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Buyer, upon the written request of Seller, will, and
will cause its representatives to, promptly deliver to Seller any and all
documents or other materials furnished by Seller to Buyer in connection with
this Agreement without retaining any copy thereof and without using any
confidential information of Seller to solicit any customers of Seller. In the
event of such request, all other documents, whether analyses, compilations or
studies, that contain or otherwise reflect the information furnished by Seller
to Buyer, shall be destroyed by Buyer or shall be returned to Seller, and Buyer
shall confirm to Seller in writing that all such materials have been returned or
destroyed. No failure or delay by Seller in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
6.03. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that in the event of a breach by Buyer of this Article VI, money damages would
not be an adequate remedy to Seller for such breach and, even if money damages
were adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained by Seller therefrom. Accordingly, if there should
be a breach or threatened breach by Buyer of provisions of this Article VI,
Seller shall be entitled to an injunction restraining Buyer from any breach
without showing or proving actual damage sustained by Seller. Nothing in the
preceding sentence shall limit or otherwise affect any remedies that Seller may
otherwise have under Applicable Law.
6.04. USE OF METROMEDIA NAME. Neither Buyer nor any Affiliate of Buyer
shall use the "Metromedia" tradename in the conduct of its business after the
Closing without Seller's prior written consent.
6.05. BANK WAIVERS. Buyer shall use reasonable commercial efforts to
obtain the requisite consents of the lenders under the MGM Credit Facility.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01. FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
reasonably desirable under Applicable Law to consummate the transactions
contemplated by this Agreement. Buyer and Seller agree to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may
43
be reasonably necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.
7.02. CERTAIN FILINGS.The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any Contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers. Without limiting the
foregoing, the parties hereto shall each promptly complete and file all reports
and forms, and respond to all requests or further requests for additional
information, if any, as may be required or authorized under the HSR Act.
7.03. PUBLIC ANNOUNCEMENTS. Up to (and including) the Closing Date,
each party agrees that, without the consent of the other party, it will not,
except as may be required by the rules of the American Stock Exchange, Inc. or
Applicable Law, issue any press release or make any public statement with
respect to this Agreement or the transactions contemplated hereby. For a period
of ten (10) days after the Closing Date, the parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby, and, except
as may be required by the rules of the American Stock Exchange, Inc. or
Applicable Law, will not issue any such press release or public statement prior
to such consultation. Neither Seller nor any officer, employee, director,
stockholder or other representative shall, at any time from and after the
Closing, issue any press release or make any public statement that is critical,
disparaging or otherwise could reasonably be interpreted as being negative with
respect to any of the Entertainment Companies or their respective businesses or
financial condition or officers, employees or directors.
7.04. ADMINISTRATION OF ACCOUNTS. All payments and reimbursements made
in the ordinary course by any third party in the name of or to Seller or any
Affiliate thereof in connection with or arising out of the business of any
Entertainment Company shall be held by Seller or such Affiliate in trust for the
benefit of the relevant Entertainment Company and, immediately upon receipt by
Seller or such Affiliate of any such payment or reimbursement, Seller shall pay,
or cause to be paid, over to the relevant Entertainment Company the amount of
such payment or reimbursement without right of set off.
7.05. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that in the event of a breach by one party hereto of this Article VII, money
damages would not be an adequate remedy to the other party for such breach and,
even if money damages were adequate, it would be impossible to ascertain or
measure with any degree of accuracy the damages sustained by the non-breaching
party therefrom. Accordingly, if there should be a breach or threatened breach
by one party of provisions of this Article VII, the non-breaching party shall be
entitled to an injunction restraining the breaching party from any breach
without showing or proving actual damage sustained by the non-breaching party.
44
7.06. RIGHT OF FIRST NEGOTIATION. For a period of five (5) years
following consummation of the Closing, Buyer will afford Seller a right of first
negotiation to obtain the right to distribute by wired or wireless cable, in the
territories noted on SCHEDULE 7.06, all Films owned by Buyer or any of its
Subsidiaries, all Library Films and all Films hereafter produced by Buyer or any
of its Subsidiaries, including without limitation, the Entertainment Companies,
to the extent Buyer owns such rights in the territories specified and subject to
any existing licenses or other agreements to which Buyer or any of its
Subsidiaries is a party or by which Buyer or any of its Subsidiaries is bound.
In the event Buyer elects to dispose of any rights covered by the first
negotiation described herein to any third party, Buyer and Seller shall
negotiate in good faith for a period of fifteen (15) days following written
notice by Buyer to Seller of its desire to dispose of such rights for the
purposes of agreeing upon the terms under which said rights may be conveyed to
Seller. In the event the parties are unable to agree on terms within said
fifteen (15) day period, Buyer shall be free to dispose of said rights without
any further obligation of any kind to Seller.
7.07. PROXY CONSENT SOLICITATION.
(a) In connection with any proxy statement or consent
solicitation that may be distributed to stockholders of Seller with respect to
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, Buyer will furnish to Seller in writing such
information and documents concerning Buyer and its Subsidiaries as Seller
reasonably requests for use in connection with any such proxy statement or
consent solicitation and, to the extent permitted by law, will indemnify and
hold harmless Seller, its directors and officers and each other Person who
controls Seller (within the meaning of the Securities Act of 1933 (the
"Securities Act")) against any losses, claims, damages, liabilities, joint or
several, to which Seller or any such director or officer or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
any untrue statement of a material fact contained in the proxy statement or
consent solicitation or any amendment thereof or supplement thereto or (ii) any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is made in such proxy statement or consent solicitation or
any amendment or supplement thereto in reliance upon and in conformity with
written information concerning Buyer or any of its Affiliates prepared and
furnished to Seller by Buyer expressly for use therein, and Buyer will reimburse
Seller and each such director, officer and controlling person for any legal or
any other expenses incurred by them in connection with defending any such loss,
claim, liability, action or proceeding.
(b) To the extent permitted by law, Seller will indemnify and
hold harmless Buyer, its directors and officers and each other Person who
controls Buyer (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities, joint or several, to which Buyer or any such
director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue statement of a
material fact contained in the proxy statement or consent solicitation or any
amendment thereof or supplement thereto or (ii) any omission of a material fact
required to
45
be stated therein or necessary to make the statements therein not misleading,
but only to the extent that such untrue statement or omission is not made in
such proxy statement or consent solicitation or any amendment or supplement
thereto in reliance upon and in conformity with written information concerning
Buyer or any of its Affiliates prepared and furnished to Seller by Buyer
expressly for use therein, and Seller will reimburse Buyer and each such
director, officer and controlling person for any legal or any other expenses
incurred by them in connection with defending any such loss, claim, liability,
action or proceeding.
7.08. REFINANCING OF DEBT.
(a) Concurrent with the Closing, Seller will (i) offset
against any amounts owing to Seller or any Affiliate of Seller (other than any
Entertainment Company) from any Entertainment Company all payables owed from
Seller or any Affiliate of Seller (other than any Entertainment Company) to such
Entertainment Company on the Closing Date and (ii) if following the offset
provided for in (i), (A) there are any remaining amounts owing to Seller or any
Affiliate of Seller (other than any Entertainment Company) by any Entertainment
Company, contribute all such amounts to the capital of such Entertainment
Company, or (B) there are any remaining amounts owing to any Entertainment
Company, pay all such amounts.
(b) Seller and Orion shall cooperate with Buyer, between the
date hereof and the Closing Date, in order to assist Buyer in arranging for the
New Orion Credit Facility to be executed and become effective concurrent with
the Closing, such that funds may be drawn thereunder to be utilized, along with
other funds to be made available to Orion by Buyer concurrent with the Closing,
to satisfy all of Orion's obligations under the Existing Orion Credit Facility.
Buyer covenants to deliver to Orion concurrent with the Closing an amount of
cash such that such cash, together with funds available at such time under the
New Orion Credit Facility, will be sufficient to permit Orion to satisfy all its
obligations under the Existing Orion Credit Facility and cause Seller and its
Affiliates to be released of all obligations thereunder.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. CONDITIONS TO OBLIGATION OF BUYER. The obligations of Buyer to
consummate the Closing are subject to the satisfaction on or prior to the
Closing Date of each of the following conditions:
(a) (i) Each of Seller and Orion shall have performed and
satisfied each of its obligations hereunder required to be performed and
satisfied by it on or prior to the Closing Date, (ii) each of the
representations and warranties of Seller contained in this Agreement shall be
true and correct, at and as of the Closing Date with the same force and effect
as if made as of the Closing Date (except that representations and warranties
made as of a specific date (other than the date of this Agreement) shall
continue to be true and correct in all material respects as of such specific
date), except for any breach of any such representations or warranties which,
when combined with all other breaches of such representations and warranties,
could not be reasonably
46
expected to result in a Material Adverse Effect, and (iii) Buyer shall have
received certificates signed by a duly authorized executive officer of Seller to
the foregoing effect and to the effect that, to the knowledge of such executive
officer, the conditions specified in this Section 8.01 have been satisfied.
(b) All Required Governmental Approvals and Essential Consents
shall have been obtained without the imposition of any conditions that are or
would become applicable to any Entertainment Company or Buyer (or any of its
Affiliates) after the Closing that Buyer in good faith determines would be
materially burdensome upon the Entertainment Companies taken as a whole or Buyer
(or any of its Affiliates) or the businesses of the Entertainment Companies
taken as a whole and Buyer substantially as such businesses have been conducted
prior to the Closing Date or as said businesses, as of the date hereof, would
reasonably be expected to be conducted after the Closing Date. All such Required
Governmental Approvals and Essential Consents shall be in effect. All conditions
and requirements prescribed by any Required Governmental Approval and Essential
Consent (or any such other consent) to be satisfied on or prior to the Closing
Date shall have been satisfied allowing all such Required Governmental Approvals
and Essential Consents (and all such other consents) to be effective and
enforceable, and to remain effective and enforceable against the Persons giving
such Required Governmental Approvals and Essential Consents (and such other
consents) assuming continued compliance with the terms thereof.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or prohibition preventing
the transfer and exchange contemplated hereby or the consummation of the
Closing, or imposing Damages in respect thereto, shall be in effect, and there
shall be no pending or threatened actions or proceedings (i) by any Governmental
Authority (or determinations by any Governmental Authority) challenging or in
any manner seeking to restrict or prohibit the transactions contemplated hereby
or the consummation of the Closing, (ii) or by any Governmental Authority (or
determinations by any Governmental Authority) or by any other person or to
impose conditions that Buyer reasonably determines would be materially
burdensome upon the Entertainment Companies taken as a whole, the Shares or
Buyer (or any of its Affiliates) or the businesses of the Entertainment
Companies taken as a whole and Buyer substantially as such businesses have been
conducted prior to the Closing Date or as said businesses, as of the date
hereof, could be reasonably expected to be conducted after the Closing Date.
(d) Since the date hereof, there shall not have been any
change in any Entertainment Company, its assets or the Shares (including any
damage, destruction or other casualty loss, but excluding any event, occurrence,
development or state of circumstances or facts or change resulting from changes
in general economic conditions) that has had or that could be reasonably
expected to have, either alone or together with all such events, occurrences,
developments, states of circumstances or facts or changes, a Material Adverse
Effect.
(e) Buyer shall have received an opinion of counsel from ▇▇▇▇,
Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ in form and substance reasonably satisfactory
to Buyer.
47
(f) Buyer and its Subsidiaries shall have obtained in writing
all consents, approvals and waivers required to be obtained by Buyer and its
Subsidiaries by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby under the MGM Credit
Facility.
(g) All Persons who are directors of any Entertainment Company
whose principal employment is not as an officer and/or employee of an
Entertainment Company shall have resigned such directorships.
(h) Seller shall have provided to Buyer written evidence
satisfactory to Buyer of the consummation of the transfer of the ownership of
all issued and outstanding stock of Landmark to an Affiliate of Seller that is
not an Entertainment Company.
8.02. CONDITIONS TO OBLIGATION OF SELLER. The obligations of Seller to
consummate the Closing are subject to the satisfaction on or prior to the
Closing Date of each of the following conditions:
(a) (i) Buyer shall have performed and satisfied each of its
obligations hereunder required to be performed and satisfied by it on or prior
to the Closing Date; (ii) the representations and warranties of Buyer contained
in this Agreement shall be true, complete and accurate in all material respects
at and as of the Closing Date, as if made at and as of the Closing Date (except
that representations and warranties made as of a specific date (other than the
date of this Agreement) shall continue to be true and correct in all material
respects as of such specific date) except for any breach of any such
representations and warranties which, when combined with all other breaches of
such representations and warranties, would not be materially adverse to Seller
and (iii) Seller shall have received a certificate signed by a duly authorized
senior officer of Buyer to the foregoing effect and to the effect that, to such
senior officer's knowledge, the conditions specified in this Section 8.02 have
been satisfied.
(b) All Required Governmental Approvals and Essential Consents
shall have been obtained without the imposition of any conditions that are or
would become applicable to Seller (or any of its Affiliates) after the Closing
that Seller in good faith determines would be materially burdensome upon Seller
(or any of its Affiliates) or the businesses of Seller taken as a whole and
Buyer substantially as such businesses have been conducted prior to the Closing
Date or as said businesses, as of the date hereof, would reasonably be expected
to be conducted after the Closing Date. All such Required Governmental Approvals
and Essential Consents shall be in effect. All conditions and requirements
prescribed by any Required Governmental Approval and Essential Consent (or any
such other consent) to be satisfied on or prior to the Closing Date shall have
been satisfied allowing all such Required Governmental Approvals and Essential
Consents (and all such other consents) to be effective and enforceable, and to
remain effective and enforceable against the Persons giving such Required
Governmental Approvals and Essential Consents (and such other consents) assuming
continued compliance with the terms thereof.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order,
48
preliminary or permanent injunction, cease and desist order or other order
issued by any court of competent jurisdiction or any competent Governmental
Authority or any other legal restraint or prohibition preventing the transfer
and exchange contemplated hereby or the consummation of the Closing, or imposing
Damages in respect thereto, shall be in effect, and there shall be no pending or
threatened actions or proceedings (i) by any Governmental Authority (or
determinations by any Governmental Authority) challenging or in any manner
seeking to restrict or prohibit the transactions contemplated hereby or the
consummation of the Closing, (ii) or by any Governmental (or determinations by
any Governmental Authority) or by any other person or to impose conditions that
Seller reasonably determines would be materially burdensome upon Seller (or any
of its Affiliates) or the businesses of Seller substantially as such businesses
have been conducted prior to the Closing Date or as said businesses, as of the
date hereof, could be reasonably expected to be conducted after the Closing
Date.
(d) Seller shall have received an opinion of counsel from
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in form and substance reasonably satisfactory to
Seller.
(e) Seller shall have obtained the approval of its
stockholders required to be obtained by Seller by virtue of the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby under its Certificate of Incorporation, its Bylaws or Applicable Law.
(f) Seller shall have been released of all obligations as
guarantor of that certain Lease pertaining to the real property located at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, occupied by the Entertainment
Companies on the date hereof.
(g) Seller and its Affiliates shall have been released from
all obligations thereof in connection with the Existing Orion Credit Facility.
ARTICLE IX
INDEMNIFICATION
9.01. INDEMNIFICATION OF BUYER. From and after the Closing Date and
subject to the terms and conditions of this Section 9.01, Buyer and its
Affiliates (collectively, the "Buyer Indemnitees") shall each be indemnified and
held harmless to the extent set forth in this Article IX by Seller in respect of
any and all Damages actually incurred by any Buyer Indemnitee:
(a) as a result of any misrepresentation in or breach of or
failure to perform any representation, warranty, covenant and/or agreement
made by Seller in this Agreement; PROVIDED, HOWEVER, that Seller, with
respect to Damages incurred by any Buyer Indemnitee as a result of any
such misrepresentation, breach or failure other than those described in
clauses (i) or (ii) of Section 9.03(c) (as to which the limits described
in this proviso shall not apply), shall have no obligation under this
clause (i) of Section 9.01(a) unless and until the aggregate amount of
Damages so incurred by all Buyer Indemnitees collectively exceeds Fifteen
Million Dollars ($15,000,000), whereupon Seller shall be liable
49
to indemnify the Buyer Indemnitees for all such Damages in excess of such
amount up to a maximum amount equal to the Purchase Price;
(b) as a result of any violations or infringements of any
material Applicable Law, or any order, writ, injunction or decree of any
Governmental Authority, but only to the extent that such violation or
infringement occurs prior to the Closing Date; or
(c) as a result of any liability arising out of or in
connection with the litigation described in SCHEDULE 9.01(C) or by or
among one or more of the parties to such litigation identified therein or
arising out of the facts giving rise to the matters described therein, and
all counter-claims, cross-claims and other actions relating thereto.
Any indemnity arising with respect to Taxes shall be governed by the provisions
of Article XI below.
9.02. INDEMNIFICATION OF SELLER. From and after the Closing Date,
Seller and its Affiliates (collectively, the "Seller Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this Article IX by
Buyer in respect of any and all Damages actually incurred by any Seller
Indemnitee (i) as a result of any misrepresentation in or breach of or failure
to perform any representation, warranty, covenant or agreement made by Buyer in
this Agreement and (ii) resulting from Buyer's operation of the Entertainment
Companies or ownership of the Shares after the Closing Date.
9.03. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Except as otherwise provided in this Article IX, all
representations, warranties, covenants, agreements and obligations of each
Indemnifying Party contained herein and all claims of any Buyer Indemnitee or
Seller Indemnitee in respect of any breach of any representation, warranty,
covenant, agreement or obligation of any Indemnifying Party contained in this
Agreement, shall survive the Closing and any due diligence examination or
investigation by Buyer, regardless of when it is conducted, and shall expire on
the first anniversary of the Closing Date.
(b) Notwithstanding Section 9.03(a), each of the
representations and warranties of Seller set forth in Sections 3.20 and 3.21
shall survive the Closing Date and shall expire on the second anniversary of the
Closing Date.
(c) Notwithstanding Section 9.03(a), each of the following
representations, warranties, covenants, agreements and obligations of Seller as
Indemnifying Party shall survive the Closing Date until the expiration of thirty
(30) days following any applicable statute of limitations, including extensions
thereof: (i) any misrepresentation in or breach of any representation or
warranty made in Sections 3.01, 3.02, 3.03, 3.04, 3.17, 3.23, 3.24 or 3.26 and
(ii) the breach or failure to perform by Seller after the Closing Date of any of
the covenants, agreements or obligations contained in this Agreement or in the
Exhibits attached hereto required to be performed after the Closing Date,
including those contained in Section 7.07 and Article XI.
50
(d) Notwithstanding Section 9.03(a), each of the following
representations, warranties, covenants, agreements and obligations of Buyer as
an Indemnifying Party shall survive the Closing Date until the expiration of
thirty (30) days following the applicable statute of limitations, including
extensions thereof: (i) any misrepresentation in or breach of any representation
or warranty made in Sections 4.01, 4.02 or 4.05 and (ii) the breach or failure
to perform by Buyer after the Closing Date of any of the covenants, agreements
or obligations of Buyer contained in this Agreement or in the Exhibits attached
hereto required to be performed after the Closing Date.
9.04. CLAIMS FOR INDEMNIFICATION.
(a) If any Indemnitee shall believe that such Indemnitee is
entitled to indemnification pursuant to this Article IX in respect of any
Damages, such Indemnitee shall promptly give the appropriate Indemnifying Party
notice of such claim (a "Notice of Claim") (but such Notice of Claim must be
delivered within the time periods specified in Sections 9.03(a), (b) and (c)).
Any such Notice of Claim shall set forth in reasonable detail and to the extent
then known the basis for such claim for indemnification and the amount of the
claim, to the extent specified or otherwise known. The failure of such
Indemnitee to give the Notice of Claim for indemnification promptly shall not
adversely affect such Indemnitee's right to indemnity hereunder except to the
extent that the defense of any claim is prejudiced by such failure.
(b) No Person shall have any claim or cause of action as a
result of any misrepresentation in or breach of or failure to perform any
representation, warranty, covenant, agreement or obligation of any Indemnifying
Party referred to in this Article IX against any Affiliate, stockholder,
director, officer, employee, consultant or agent of such Indemnifying Party
unless any of the foregoing is a successor or assign of such Indemnifying Party.
Nothing set forth in this Article IX shall be deemed to prohibit or limit any
Buyer Indemnitee's or Seller Indemnitee's right at any time before, on or after
the Closing Date, to seek injunctive or other equitable relief for the failure
of any Indemnifying Party to perform any covenant or agreement contained herein.
9.05. DEFENSE OF CLAIMS.
(a) In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding against an Indemnitee by a Person that is not a party hereto, the
Indemnifying Party may (unless such Indemnitee elects not to seek indemnity
hereunder for such claim), upon written notice to the relevant Indemnitee,
assume the defense of any such claim or Proceeding if all Indemnifying Parties
with respect to such claim or Proceeding jointly acknowledge to the Indemnitee
its right to indemnity pursuant hereto in respect of the entirety of such claim
(as such claim may have been modified through written agreement of the parties)
and provide assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Parties will be financially able to satisfy such claim in full if
such claim or Proceeding is decided adversely. If the Indemnifying Parties
assume the defense of any such claim or Proceeding, the Indemnifying Parties
shall select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or Proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times reasonably diligently and
promptly pursue the resolution
51
thereof. If the Indemnifying Parties shall have assumed the defense of any claim
or Proceeding in accordance with this Section 9.05, the Indemnifying Parties
shall be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, with the consent of the Indemnitee,
which consent will be not unreasonably withheld or delayed; PROVIDED, that no
such consent shall be required from such Indemnitee if the Indemnifying Parties
shall pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; PROVIDED, FURTHER, that
the Indemnifying Parties shall not be authorized to encumber any of the assets
of any Indemnitee or to agree to any restriction that would apply to any
Indemnitee or to its conduct of business; and PROVIDED, FURTHER, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, officers, employees and if named as a defendant, consultants
and agents with respect to such claim. Each Indemnitee shall be entitled to
participate in the defense of any such action at its own cost and expense. Each
Indemnitee shall, and shall cause each of its Affiliates, officers, employees,
consultants and agents to, cooperate fully with the Indemnifying Parties in the
defense of any claim or Proceeding being defended by the Indemnifying Parties
pursuant to this Section 9.05.
(b) If the Indemnifying Parties do not assume the defense of
any claim or Proceeding resulting therefrom in accordance with the terms of this
Section 9.05(a), such Indemnitee may defend against such claim or Proceeding in
the manner as it may deem appropriate, including settling such claim or
Proceeding after giving notice of the same to the Indemnifying Parties, on such
terms as such Indemnitee may deem appropriate. If the Indemnifying Parties seek
to question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, the Indemnifying
Parties shall have the burden to prove by a preponderance of the evidence that
such Indemnitee did not defend such claim or Proceeding in a reasonably prudent
manner.
(c) Although the indemnification rights provided in this
Article IX shall extend to the respective Affiliates of Buyer and Seller, for
the purpose of the procedures set forth in this Section 9.05, any claims for
indemnification shall be made by and through Buyer or Seller, as the case may
be.
9.06. NATURE OF PAYMENTS. Any payment under this Article IX shall be
treated for tax purposes as an adjustment of the Purchase Price to the extent
such characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations.
9.07. TAXES The provisions of this Article IX shall not be
applicable to Taxes, which shall be governed by Article XI.
52
ARTICLE X
TERMINATION
10.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at
any time (except with respect to clauses (h), (i), (j) and (k) which contain
certain time limitations) prior to the Closing:
(a) by mutual written agreement of all of the parties hereto;
(b) by Buyer after written notice to Seller of any one or more
misrepresentations in or breaches of the representations or warranties made by
Seller contained herein that, if not cured on or prior to the Closing Date,
could be reasonably expected to give Buyer grounds not to close under Section
8.01 when taken into account with all other uncured misrepresentations in or
breaches of such representations or warranties as to which Buyer shall have
given notice to Seller as provided in this paragraph (b). A termination pursuant
to this paragraph (b) shall become effective (i) fifteen (15) days after such
notice with respect to such a misrepresentation or breach that is not capable of
being cured on or prior to the Closing Date, or (ii) immediately prior to the
Closing with respect to such a misrepresentation or breach that is capable of
being cured, but is not cured, on or prior to the Closing Date;
(c) by Buyer after written notice to Seller of the failure by
Seller or any Entertainment Company to perform and satisfy any of its
obligations under this Agreement required to be performed and satisfied by
Seller or such Entertainment Company on or prior to the Closing Date, if the
aggregate of all such failures shall be material. A termination pursuant to this
paragraph (c) shall become effective (i) fifteen (15) days after such notice
with respect to such a failure that is not capable of being cured on or prior to
the Closing Date, or (ii) immediately prior to the Closing with respect to such
a failure that is capable of being cured, but is not cured, on or prior to the
Closing Date;
(d) by Seller after written notice to Buyer of any one or more
misrepresentations in or breaches of the representations or warranties made by
Buyer herein which, if not cured on or prior to the Closing Date, could be
reasonably expected to give Seller grounds not to close under Section 8.02 when
taken into account with all other uncured misrepresentations in or breaches of
such representations or warranties as to which Seller shall have given notice to
Buyer as provided in this clause (d). A termination pursuant to this paragraph
(d) shall become effective (i) fifteen (15) days after such notice with respect
to such a misrepresentation or breach that is not capable of being cured on or
prior to the Closing Date, or (ii) immediately prior to the Closing with respect
to such a misrepresentation or breach that is capable of being cured, but is not
cured, on or prior to the Closing Date;
(e) by Seller after written notice to Buyer of Buyer's failure
to perform and satisfy any of its obligations under this Agreement required to
be performed and satisfied by Buyer on or prior to the Closing Date, if the
aggregate of all such failures shall be material. A termination pursuant to this
paragraph (e) shall become effective (i) fifteen (15) days after such
53
notice with respect to such a failure that is not capable of being cured on or
prior to the Closing Date, or (ii) immediately prior to the Closing with respect
to such a failure that is capable of being cured, but is not cured, on or prior
to the Closing Date;
(f) by Buyer or by Seller, if the Closing shall not have been
consummated by September 30, 1997; PROVIDED, HOWEVER, that neither Buyer nor
Seller may terminate this Agreement pursuant to this clause (f) if the Closing
shall not have been consummated within such time period by reason of the failure
of such party or any of its Affiliates to perform in all material respects any
of its or their respective covenants or agreements contained in this Agreement;
(g) by any party hereto if any Federal, state or foreign law
or regulation thereunder shall hereafter be enacted or become applicable that
makes the transactions contemplated hereby or the consummation of the Closing
illegal or otherwise prohibited, or if any judgment, injunction, order or decree
enjoining either party hereto from consummating the transactions contemplated
hereby is entered, and such judgment, injunction, order or decree shall become
final and nonappealable;
(h) by Buyer by written notice delivered to Seller at any time
prior to 5:00 p.m. (Los Angeles time) on May 9, 1997, if at any time prior to
such time Buyer discovers any fact, occurrence or circumstance relating to any
Entertainment Company not known to Buyer on or before the date of this Agreement
that is materially adverse to the assets, liabilities, business, operations or
financial condition of the Entertainment Companies taken as a whole.
(i) by Buyer or Seller if Seller shall have convened a meeting
of its stockholders to vote upon this Agreement and the transactions
contemplated hereby and at such meeting shall have failed to obtain in writing
all consents and approvals of its stockholders required to be obtained by Seller
by virtue of the execution and delivery of this Agreement or the transactions
contemplated hereby under its Certificate of Incorporation, its Bylaws or
Applicable Law.
(j) by Seller at any time after submission of this Agreement
and the transactions contemplated herein by the stockholders of Seller in
accordance with Applicable Law, if (i) Seller's financial advisors shall have
withdrawn (either before or after such meeting) their opinion to the effect that
the Purchase Price is fair to Seller's stockholders from a financial point of
view or (ii) Seller's Board of Directors shall have withdrawn, modified or
amended in any material respect its approval or recommendation of this Agreement
or the transactions contemplated hereby and Seller receives a legal opinion of
Delaware counsel that is reasonably acceptable to Buyer to the effect that
submission of this Agreement and the transactions contemplated hereby would be
unlawful under Delaware law.
(k) by Seller at any time prior to the approval of this
Agreement and the transactions contemplated herein by the stockholders of Seller
in accordance with Applicable Law, if Seller's Board of Directors determines in
good faith, on the basis of the advice of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ or other outside counsel of comparable stature, that the approval and
adoption of this Agreement and the transactions contemplated hereby would be
inconsistent with
54
the compliance by the Board of Directors with its fiduciary duties to
stockholders under Applicable Law.
The party desiring to terminate this Agreement pursuant to clauses
(b) through (k) shall give written notice of such termination to the other
party.
10.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of any
party to any other party to this Agreement except as hereinafter expressly
provided in this Section 10.02. If such termination shall result from the breach
by any party of its representations, warranties or covenants contained in this
Agreement, such party shall be fully liable for any and all Damages incurred or
suffered by the other parties as a result of such failure or breach. The
provisions of Sections 5.05, 6.02, 12.04, 12.06 and 12.12 shall survive any
termination of this Agreement pursuant to Article X, and each party hereto shall
be fully responsible for any breach of any such provision, whether or not such
breach occurs prior to or after the termination of this Agreement.
10.03.COMMITMENT FEE.
(a) To compensate Buyer for entering into this Agreement and
taking action to consummate the transactions contemplated hereby and incurring
the costs and expenses related thereto and other losses and expenses, including
the foregoing by Buyer of other opportunities, Seller agrees to pay to Buyer an
aggregate amount equal to Thirty Million Dollars ($30,000,000), less any amount
due pursuant to Section 10.03(c) below (the "Commitment Fee") if this Agreement
is terminated:
(i) by Seller pursuant to Section 10.01(j) or (k);
(ii) by Buyer or Seller pursuant to Section 10.01(i), if, in any such
case specified in this clause (ii), prior to the time of Seller's meeting
of stockholders (A) Seller's Board of Directors shall have withdrawn,
modified or amended in any material respect its approval or recommendation
of this Agreement or the transactions contemplated hereby or shall have
resolved to do any of the foregoing, (B) Seller's Board of Directors shall
have recommended acceptance of any Alternative Proposal or shall have
resolved to do so or (C) Seller or any of its Affiliates shall have
entered into an agreement providing for an Alternative Proposal with a
party other than Buyer or shall have resolved to do so; or
(iii) by Buyer or Seller pursuant to Section 10.01(i), if, in any
such case specified in this clause (iii) (A) prior to the time of Seller's
meeting of stockholders an Alternative Proposal shall have been publicly
announced or shall have become publicly known or Seller's financial
advisors shall have withdrawn, modified or amended in any material respect
their opinion to the effect that the Purchase Price is fair to Seller's
stockholders from a financial point of view, (B) Seller's Board of
Directors shall not have withdrawn, modified or amended in any material
respect its approval and recommendation of this Agreement and the
transactions contemplated hereby, Seller's Board of Directors shall not
have recommended acceptance of any Alternative Proposal nor shall Seller's
Board of
55
Directors have resolved to do so, and neither Seller nor any of its
Affiliates shall have entered into an agreement providing for an
Alternative Proposal with a party other than Buyer nor shall any of them
have resolved to do so and (C) during the term of this Agreement or within
one (1) year after the termination of this Agreement, Seller's Board of
Directors recommends an Alternative Proposal with a party other than
Buyer, Seller or any of its Affiliates enters into an agreement providing
for an Alternative Proposal with a party other than Buyer, or an
Alternative Proposal with a party other than Buyer occurs, and, in any
such case, the purchase price in respect of such Alternative Proposal (or
the portion thereof allocable to the Entertainment Companies or their
assets, if such Alternative Proposal relates to Seller or assets and
operations of Seller in addition to the Entertainment Companies) is higher
than the Purchase Price; PROVIDED, HOWEVER, that in determining such
purchase price, there shall be included therein the fair value of any
property of any Entertainment Company transferred to Seller in connection
with or in anticipation of such transaction.
(b) The Commitment Fee and the reimbursement of expenses
required by Section 10.03(c) shall be payable (i) at the time of termination if
the termination is by Seller pursuant to Section 10.01(j) or (k), (ii) on the
next business day following termination if the termination is by Buyer or Seller
pursuant to Section 10.01(i) and is covered by clause (ii) of Section 10.03(a)
and (iii) on the next business day following the earliest of the recommendation
of an Alternative Proposal, the entering into of an agreement providing for an
Alternative Proposal or the occurrence of an Alternative Proposal, if the
termination is by Seller or Buyer pursuant to Section 10.01(i) and such
termination is covered by clause (iii) of Section 10.03(a).
(c) Seller shall reimburse Buyer and its Affiliates for actual
out-of-pocket expenses, not to exceed Ten Million Dollars ($10,000,000), of
Buyer and its Affiliates incurred in connection with or arising out of this
Agreement and the transactions contemplated hereby (including, without
limitation, amounts paid or payable to investment bankers, fees and expenses of
counsel, accountants and consultants, and printing expenses), regardless of when
those expenses are incurred, if this Agreement is terminated:
(i) by Seller pursuant to Section 10.01(j) or (k);
(ii) by Buyer or Seller pursuant to Section 10.01(i) or (j), if, in
any such case specified in this clause (ii), prior to the time of Seller's
meeting of stockholders (A) Seller's Board of Directors shall have
withdrawn, modified or amended in any material respect its approval or
recommendation of this Agreement or the transactions contemplated hereby
or shall have resolved to do any of the foregoing, (B) Seller's Board of
Directors shall have recommended acceptance of any Alternative Proposal or
shall have resolved to do so or (C) Seller or any of its Affiliates shall
have entered into an agreement providing for an Alternative Proposal with
a party other than Buyer or shall have resolved to do so; or
(iii) by Buyer or Seller pursuant to Section 10.01(i), if, in any
such case specified in this clause (iii) (A) prior to the time of Seller's
meeting of stockholders an Alternative Proposal shall have been publicly
announced or shall have become publicly
56
known or Seller's financial advisors shall have withdrawn, modified or
amended in any material respect their opinion to the effect that the
Purchase Price is fair to Seller's stockholders from a financial point of
view, (B) Seller's Board of Directors shall not have withdrawn, modified
or amended in any material respect its approval and recommendation of this
Agreement and the transactions contemplated hereby, Seller's Board of
Directors shall not have recommended acceptance of any Alternative
Proposal nor shall Seller's Board of Directors have resolved to do so, and
neither Seller nor any of its Affiliates shall have entered into an
agreement providing for an Alternative Proposal with a party other than
Buyer nor shall any of them have resolved to do so and (C) during the term
of this Agreement or within one (1) year after the termination of this
Agreement, Seller's Board of Directors recommends an Alternative Proposal
with a party other than Buyer, Seller or any of its Affiliates enters into
an agreement providing for an Alternative Proposal with a party other than
Buyer, or an Alternative Proposal with a party other than Buyer occurs,
and, in any such case, the purchase price in respect of such Alternative
Proposal (or the portion thereof allocable to the Entertainment Companies
or their assets, if such Alternative Proposal relates to Seller or assets
and operations of Seller in addition to the Entertainment Companies) is
higher than the Purchase Price; PROVIDED, HOWEVER, that in determining
such purchase price, there shall be included therein the fair value of any
property of any Entertainment Company transferred to Seller in connection
with or in anticipation of such transaction.
(d) Seller acknowledges that the agreements contained in this
Section 10.03 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Buyer would not enter into this
Agreement. Accordingly, if Seller fails to pay any amounts owing pursuant to
this Section 10.03 when due, Seller shall in addition thereto pay to Buyer all
costs and expenses (including attorneys' fees and costs) incurred in collecting
such amounts, together with interest on such amounts (or any unpaid portion
thereof) from the date such payment was required to be made until the date such
payment is received by Buyer at one percentage point in excess of the Reference
Rate as in effect from time to time during such period; PROVIDED, HOWEVER, that
in no event shall such interest rate exceed the maximum rate permitted by
Applicable Law.
ARTICLE XI
TAX MATTERS
▇▇.▇▇.▇▇▇ RETURNS AND PAYMENTS.
(a) Seller shall be responsible for the preparation and filing
of all Seller's Consolidated Returns with respect to all Pre-Closing Periods,
which shall include the Entertainment Companies, and for the payment of all
federal Income Taxes with respect to such Consolidated Returns. Seller shall be
entitled to any refunds of Income Taxes with respect to such Tax Returns.
(b)(i) Seller shall be responsible for the preparation and
filing of all Tax Returns, other than Consolidated Returns, of the
Entertainment Companies for any Pre-Closing Period, that are required to
be filed on or before the Closing Date, and for the payment of all Taxes
with respect to such Tax Returns. Seller shall be entitled to any refunds
of Taxes with respect to such Tax Returns. Such Tax Returns shall be
prepared in a manner consistent with prior practice, and shall utilize
accounting methods, elections and conventions that do not have the effect
of distorting the allocation of income or expense between Pre-Closing
Periods and Post-Closing Periods.
(ii) Buyer shall be responsible for the preparation and filing
of all Tax Returns, other than Consolidated Returns, of the Entertainment
Companies for any Pre-Closing Period, that are required to be filed after
the Closing Date. Seller shall pay Buyer, in immediately available funds,
any Taxes that are required to be paid with such Tax Returns, and shall be
entitled to any refunds of Taxes with respect to such Tax Returns.
(c) Buyer shall be responsible for the preparation and filing of all
Straddle Period Tax Returns with respect to the Entertainment Companies, and for
the payment of all Taxes with respect to such returns. Seller shall reimburse
Buyer, in immediately available funds, for the portion of any Tax relating to a
Straddle Period that is allocable, in accordance with paragraph (f) below, to
the pre-Closing portion of such Straddle Period, less any estimated Taxes paid
by Seller or the Entertainment Companies with respect to such Straddle Period
before the Closing Date. Any refunds of Straddle Period taxes shall be allocated
between the Seller and the Buyer based on the same principles.
(d) Buyer shall be responsible for the preparation and filing of all
Tax Returns and the payment of all other Taxes with respect to the Entertainment
Companies for all Post-Closing Periods. Buyer shall be entitled to any refunds
of such Taxes. In the case of any Post-Closing Tax Return where the Taxes
payable by an Entertainment Company are dependent upon the Tax attributes of or
are consistent with Tax accounting methods utilized by such Entertainment
Company for a Pre-Closing Period, without Seller's consent Buyer shall not take
a position that (i) is inconsistent with a position taken by Seller for such
Pre-Closing Period and (ii) will have the effect of increasing the Seller's Tax
liability for a Pre-Closing Period, unless in the opinion of Buyer's independent
tax counsel or accountant, Seller's position is not supported by "substantial
authority" within the meaning of Section 6662 of the Code.
(e) To the extent permitted by law, Seller and Buyer shall use their
best efforts to cause any Taxable period to close on the Closing Date.
(f) Taxes payable with respect to a Straddle Period shall be
allocated to the Pre-Closing Period and Post-Closing Period on the basis of a
closing of the books as of the Closing Date or any other method agreed upon by
Buyer and Seller, except that Taxes imposed on a periodic basis, such as real
and personal property Taxes, shall be prorated based on the number of days
before and after the Closing Date.
(g) Seller, Buyer and the Entertainment Companies shall cooperate in
good faith in (i) preparing and filing all Tax Returns, (ii) maintaining and
making available to each other all records necessary in connection with the
preparation and filing of all Tax Returns and the payment
57
of Taxes, and (iii) resolving all disputes and audits with respect to any Tax
Returns and Taxes. Buyer and Seller recognize that each may need access, from
time to time, after the Closing Date, to certain accounting and Tax records and
information held by the other; therefore, Buyer and Seller agree (i) to retain
and maintain Tax records relating to the Entertainment Companies for a period of
five (5) years after the Closing Date, (ii) to allow each other and their agents
and representatives, at times and dates mutually acceptable to the parties, to
inspect, review and make copies of such records, such activities to be conducted
during normal business hours and at the requesting party's expense, and (iii)
and to offer the other parties such records before destroying such records.
(h) Seller shall pay any stock transfer taxes due as a result of the
sale of the Shares to Buyer pursuant to the transactions contemplated by this
Agreement.
(i) Seller shall cause the provisions of any tax sharing agreement
to which any of the Entertainment Companies is a party to be terminated on or
before the Closing Date, and the Entertainment Companies shall have no liability
to Seller or its Affiliates under any such agreements.
(j) Seller shall have the sole and exclusive authority to file
amended Consolidated Tax Returns for the Entertainment Companies for any
Pre-Closing Period, and to control any Tax audits, disputes, administrative or
judicial proceedings or settlements with respect to such Consolidated Tax
Returns. Buyer and the Entertainment Companies shall have the sole and exclusive
authority to file any other amended Tax Returns and to control any other Tax
audits, disputes, administrative or judicial proceedings or settlements with
respect to the Entertainment Companies; PROVIDED, HOWEVER, that Buyer shall not
without Seller's consent file an amended Tax Return with respect to a
Pre-Closing Period or settle, compromise, challenge or litigate a Tax dispute
with respect to a Pre-Closing Period, if any such action may materially increase
Seller's liability for Taxes.
11.02.SECTION 338(H)(10).
(a) Seller shall join Buyer in making elections under Section 338(g)
and Section 338(h)(10) of the Code and any state, local and foreign counterparts
with respect to the Entertainment Companies (the "Section 338 Elections").
Seller and Buyer shall jointly complete and make the Section 338 Elections on
the applicable forms and in accordance with Applicable Law. Seller shall deliver
such forms and related documents to Buyer at least ninety (90) days prior to the
due date for filing such elections or forms. Buyer shall deliver to Seller at
least forty-five (45) days prior to the due date for filing, such completed
forms as are required to be filed with respect to the Section 338 Elections.
Buyer and Seller shall timely file the Section 338 Elections and any required
forms and documents.
(b) Buyer and Seller shall act reasonably and in good faith to reach
an agreement promptly, but in no event later than ninety (90) days after the
Closing Date, on the allocation of the Purchase Price among the assets of the
Entertainment Companies for purposes of the Section 338 Elections. If Buyer and
Seller are unable to reach an agreement within such ninety (90) day period, they
shall submit the issue to arbitration by a nationally recognized accounting firm
mutually
58
acceptable to Buyer and Seller, whose determination shall be final and binding
on both parties, and whose expenses shall be shared equally by Buyer and Seller.
The valuations and allocations determined pursuant to this Section shall be used
for purposes of all relevant Tax Returns, but shall not have any effect on any
other provision of this Agreement, except insofar as these other provisions
relate to or affect Taxes or Tax Returns.
(c) Seller shall be responsible for the payment of any Taxes of
Seller Affiliated Group or the Entertainment Companies that result from the
Section 338 Elections (the "Section 338 Taxes").
11.03.INDEMNIFICATION.
(a) Seller shall indemnify Buyer and the Entertainment Companies for
(i) all liability for Taxes of the Seller Affiliated Group, including the
Entertainment Companies, for all Pre-Closing Periods and for the portion of all
Straddle Periods that end on the Closing Date, (ii) all Section 338 Taxes, and
(iii) all liability for reasonable legal and accounting fees and expenses
incurred with respect to any item indemnified pursuant to clauses (i) and (ii)
above.
(b) Buyer and the Entertainment Companies shall indemnify Seller for
(i) all liability for Taxes of the Buyer Affiliated Group for any Post-Closing
Taxable period, (ii) all liability for Taxes of the Entertainment Companies for
the portion of all Straddle Periods that commence after the Closing Date, and
(iii) all liability for reasonable legal and accounting expenses incurred with
respect to any item indemnified pursuant to clauses (i) and (ii) above.
11.04.PROCEDURES FOR INDEMNIFICATION.
(a) If a claim is made by any Taxing authority, which, if
successful, might result in an indemnity payment by a party ("Tax Indemnitor")
to another ("Tax Indemnitee") pursuant to Section 11.02, Tax Indemnitee shall
promptly notify Tax Indemnitor in writing of such claim (a "Tax Claim"). If
notice of a Tax Claim is not given to Tax Indemnitor within a sufficient period
of time to allow Tax Indemnitor to effectively contest such Tax Claim, or in
reasonable detail to apprise Tax Indemnitor of the nature of the Tax Claim, in
each case taking into account the facts and circumstances with respect to such
Tax Claim, Tax Indemnitor shall not be liable to Tax Indemnitee to the extent
that Tax Indemnitor's ability to effectively contest such Tax Claim is actually
prejudiced as a result thereof.
(b) With respect to any Tax Claim, Tax Indemnitor shall control all
proceedings taken in connection with such Tax Claim (including, without
limitation, selection of counsel) and, without limiting the foregoing, may in
its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing authority with respect
thereto and may, in its sole discretion, either pay the Tax claimed and ▇▇▇ for
a refund where Applicable Law permits such refund suits or contest the Tax Claim
in any permissible manner; provided, however, that Tax Indemnitor shall not
settle or compromise a Tax Claim without giving thirty (30) days notice to Tax
Indemnitee and without Tax Indemnitee's consent, which shall not be unreasonably
withheld, if such settlement or compromise would result in a material Tax
Liability of Tax
59
Indemnitee or members of its affiliated group for any Taxable period. If Tax
Indemnitee reasonably withholds its consent, the indemnification obligation of
Tax Indemnitor to Tax Indemnitee under this Article XI shall be limited to the
amount of such settlement or compromise, and Tax Indemnitee shall have the right
to take over the control of any proceedings with respect to such Tax Claim at
its own expense.
(c) Buyer and Seller shall cooperate with each other in contesting
any Tax Claim, which cooperation shall include, without limitation, granting
powers of attorney to the party who is entitled to control the proceedings,
retaining and providing records and information that are reasonably relevant to
such Tax Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim.
(d) Any payment under this Article XI shall be treated for
tax purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations.
(e) The indemnification obligations of the parties set forth in
this Article XI shall survive until the expiration of the applicable statute of
limitations relating to the Taxes that are the subject of the indemnification
obligation.
ARTICLE XII
MISCELLANEOUS
12.01. NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two (2) Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below, (iii) if given by telex or telecopier, once such notice or other
communication is transmitted to the telex or telecopier number specified below
and the appropriate answer back or telephonic confirmation is received, provided
that such notice or other communication is promptly thereafter mailed in
accordance with the provisions of clause (ii) above or (iv) if sent through an
overnight delivery service in circumstances to which such service guarantees
next day delivery, the day following being so sent:
If to Seller or any Entertainment Company:
Metromedia International Group, Inc.
c/o Metromedia Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
60
with copies to:
Metromedia International Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: 212-757-3990
If to Buyer:
P&F Acquisition Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
12.02. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
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(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
▇▇.▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.
(a) The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. Whenever required
by the context, any gender shall include any other gender, the singular shall
include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including,
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
12.04. EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
12.05. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be unreasonably withheld.
12.06. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the internal laws (without reference to choice or conflict
of laws) of the State of New York.
12.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto
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and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other parties hereto.
12.08. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
12.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
12.10. SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
12.11. FORUM; ATTORNEYS' FEES. Any action or proceeding commenced
under this Agreement shall be brought solely in the federal or state courts
located in the States of New York or California. In any action commenced
hereunder, the prevailing party shall be entitled to recover its attorneys' fees
and costs from the non-prevailing party in such action or proceeding. The
parties agree that in any action or claim for Damages brought by Buyer against
Seller for a breach of any representation or warranty by Seller or Orion in
Article III (other than those representations and warranties set forth in
Sections 3.01, 3.02, 3.03, 3.04, 3.17, 3.23, 3.24 and 3.26), Seller shall not be
obligated to make any payments to Buyer until the aggregate amount of Damages so
incurred exceeds Fifteen Million Dollars ($15,000,000), whereupon Seller shall
be liable for all such Damages in excess of Fifteen Million Dollars
($15,000,000) up to a maximum amount equal to the Purchase Price.
12.12. CUMULATIVE REMEDIES. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
12.13. THIRD PARTY BENEFICIARIES. No provision of this Agreement shall
create any third party beneficiary rights in any Person, including any employee
of Buyer or employee or former employee of any Seller or any Affiliate thereof
(including any beneficiary or dependent thereof).
12.14. KNOWLEDGE. Whenever "KNOWLEDGE," "TO THE KNOWLEDGE OF," "HAS
RECEIVED NO NOTICE" or "IS NOT AWARE" (and all variants and derivatives thereof)
is used with respect to any Person, it means the actual knowledge of such
Person, after reasonable inquiry. Notwithstanding
63
the foregoing, the foregoing terms, when applied to Seller or the Entertainment
Companies, shall mean the actual knowledge, after reasonable inquiry, of any and
all officers, shareholders or directors of Seller or any Entertainment Company.
64
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.
METROMEDIA INTERNATIONAL
GROUP, INC.
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ORION PICTURES CORPORATION
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: SENIOR EXECUTIVE VICE PRESIDENT
P&F ACQUISITION CORP.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER