EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
DATED AS OF July 16, 1996
by and among
P & F ACQUISITION CORP.
CONSORTIUM DE REALISATION,
MGM HOLDINGS CORPORATION,
MGM GROUP HOLDINGS CORPORATION
and
METRO-▇▇▇▇▇▇▇-▇▇▇▇▇ INC.
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TABLE OF CONTENTS
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Page
ARTICLE I REPRESENTATIONS OF CDR, PARENT AND SELLER........................ 2
Section 1.1 Ownership of Stock........................................ 2
Section 1.2 Authorization and Validity of Agreement................... 2
Section 1.3 Consents and Approvals; No Violations..................... 3
Section 1.4 Broker's or Finder's Fees................................. 3
ARTICLE II REPRESENTATIONS OF THE COMPANY.................................. 4
Section 2.1 Authorization and Validity of Agreement................... 4
Section 2.2 Consents and Approvals, etc .............................. 4
Section 2.3 Existence and Good Standing .............................. 5
Section 2.4 Capital Stock; Indebtedness .............................. 6
Section 2.5 Subsidiaries ............................................. 6
Section 2.6 Financial Statements and No Material Changes.............. 7
Section 2.7 Title to Properties ...................................... 7
Section 2.8 Material Contracts ....................................... 8
Section 2.9 Litigation ............................................... 8
Section 2.10 Intellectual Property .................................... 8
Section 2.11 Taxes .................................................... 8
Section 2.12 Conduct of Business ...................................... 9
Section 2.13 Compliance with Laws; Permits ............................ 10
Section 2.14 Employee Benefit Plans ................................... 10
Section 2.15 Transactions with Affiliates ............................. 11
Section 2.16 Insurance ................................................ 11
ARTICLE III REPRESENTATIONS OF PURCHASER .................................. 12
Section 3.1 Existence and Good Standing of Purchaser; Authorization... 12
Section 3.2 Consents and Approvals; No Violations . .................. 12
Section 3.3 Purchase for Investment .................................. 13
Section 3.4 Available Funds .......................................... 13
Section 3.5 Litigation ............................................... 13
Section 3.6 No Outside Reliance....................................... 14
Section 3.7 Broker's or Finder's Fees ................................ 14
(i)
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ARTICLE IV SALE OF STOCK................................................... 14
Section 4.1 Sale of Stock.............................................. 14
Section 4.2 Price...................................................... 14
Section 4.3 Terminating Debt, etc...................................... 14
Section 4.4 Closing.................................................... 15
ARTICLE V CERTAIN AGREEMENTS .............................................. 15
Section 5.1 Conduct of Business of the Company ........................ 15
Section 5.2 Review of the Company; Access to Properties and
Records ................................................... 17
Section 5.3 Reasonable Best Efforts.................................... 17
Section 5.4 Directors' and Officers' Indemnification .................. 18
Section 5.5 Benefit Assurance Programs ................................ 19
Section 5.6 Non-Solicitation of Employees ............................. 19
Section 5.7 Affected Employees ........................................ 20
Section 5.8 Employee Benefits ......................................... 20
Section 5.9 Tax Sharing Agreement...................................... 21
ARTICLE VI CONDITIONS TO PURCHASER'S OBLIGATIONS........................... 21
Section 6.1 Opinion of Seller's Counsel ............................... 21
Section 6.2 Truth of Representations and Warranties ................... 21
Section 6.3 Performance of Agreements ................................. 22
Section 6.4 No Injunction.............................................. 22
Section 6.5 Governmental and Other Approvals .......................... 22
Section 6.6 Resignations............................................... 22
Section 6.7 Purchaser's Financing ..................................... 22
ARTICLE VII CONDITIONS TO SELLER'S OBLIGATIONS............................. 22
Section 7.1 Opinions of Purchaser's Counsel ........................... 23
Section 7.2 Truth of Representations and Warranties.................... 23
Section 7.3 Performance of Agreements.................................. 23
Section 7.4 No Injunction ............................................. 23
Section 7.5 Governmental Approvals . .................................. 23
ARTICLE VIII TAX MATTERS................................................... 23
Section 8.1 Tax Liabilities............................................ 23
Section 8.2 Tax Returns................................................ 24
Section 8.2A Tax Indemnification....................................... 25
Section 8.3 Cooperation; Audits........................................ 26
(ii)
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Section 8.4 Section 338................................................ 27
Section 8.5 Valuation and Allocation................................... 28
ARTICLE IX SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION............................................... 28
Section 9.1 Survival of Representations................................ 28
Section 9.2 Indemnities................................................ 29
Section 9.3 Limits on Indemnification.................................. 33
Section 9.4 Tax Matters................................................ 33
ARTICLE X TERMINATION...................................................... 33
Section 10.1 Events of Termination..................................... 33
Section 10.2 Effect of Termination..................................... 33
ARTICLE X1 MISCELLANEOUS................................................... 34
Section 11.1 Expenses................................................. 34
Section 11.2 Transfer Taxes........................................... 34
Section 11.3 Governing Law; Consent to Jurisdiction................... 34
Section 11.4 Captions................................................. 35
Section 11.5 Publicity................................................ 35
Section 11.6 Business Records......................................... 35
Section 11.7 Memorandum; Disclaimer of Projections.................... 36
Section 11.8 Notices.................................................. 36
Section 11.9 Parties in Interest...................................... 38
Section 11.10 Counterparts............................................. 38
Section 11.11 Entire Agreement......................................... 38
Section 11.12 Amendments............................................... 39
Section 11.13 Third Party Beneficiaries................................ 39
Section 11.14 Selling Group............................................ 39
Section 11.15 Liquidation of Parent.................................... 39
Section 11.16 Names.................................................... 39
(iii)
STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of July 16, 1996
by and between P&F ACQUISITION CORP., a corporation organized under the laws of
the State of Delaware ("PURCHASER"), and CONSORTIUM DE REALISATION, a societe
par actions simplifiee organized under the laws of the Republic of France
("CDR"), MGM HOLDINGS CORPORATION, a corporation organized under the laws of the
State of Delaware ("PARENT"), MGM GROUP HOLDINGS CORPORATION, a corporation
organized under the laws of the State of Delaware ("SELLER"), and METRO-▇▇▇▇▇▇▇-
▇▇▇▇▇ INC., a corporation organized under the laws of the State of Delaware (the
"COMPANY").
W I T N E S S E T H :
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WHEREAS, CDR indirectly owns all of the outstanding capital stock of
Parent; and
WHEREAS, Parent owns all of the outstanding capital stock of Seller;
and
WHEREAS, Seller is the owner of an aggregate of 10 shares of common
stock, par value $1.00 per share (the "STOCK"), of the Company, being all of the
outstanding shares of capital stock of the Company; and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase,
the Stock pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, immediately
following consummation of the purchase and sale of the Stock pursuant to this
Agreement, Purchaser shall own all of the outstanding shares of capital stock of
the Company.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
REPRESENTATIONS OF CDR. PARENT AND SELLER
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CDR, Parent and Seller (collectively, the "SELLING GROUP" and each,
individually, a "SELLING PERSON" each represents and warrants as follows:
Section 1.1 Ownership of Stock. Seller is the lawful owner of all
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of the shares of Stock, free and clear of all liens, encumbrances, restrictions
and claims of every kind and character ("ENCUMBRANCES") other than a pledge
(the "CL PLEDGE") in favor of Credit Lyonnais, S.A., as Collateral Agent, which
pledge shall be terminated upon the sale of the Stock as contemplated herein
(the "SALE"). The Stock constitutes all of the issued and outstanding shares of
capital stock of the Company. There are no outstanding subscriptions, options,
warrants, rights, calls, commitments, conversion rights, rights of exchange or
other similar agreements providing for the purchase, issuance or sale of any
shares of the capital stock of the Company, other than as contemplated by this
Agreement. At the Closing (as defined below), the Selling Group shall fully
discharge all of the obligations arising under the Company's Senior Executive
Incentive Plan dated September 16, 1994 and Senior Executive Incentive Pool Plan
dated November 27, 1995. The delivery to Purchaser of the Stock pursuant to the
provisions of this Agreement will transfer to Purchaser valid title thereto,
free and clear of any and all Encumbrances; provided that no representation is
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made regarding the ability of any Person to subsequently transfer or otherwise
dispose of such Stock without registration or qualification under, or in
compliance with, applicable Federal or state securities laws.
Section 1.2 Authorization and Validity of Agreement. Each Selling
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Person has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each Selling Person, and the consummation by each of them of
the transactions contemplated hereby, have been duly authorized and approved by
the Board of Directors or other governing body of each such Selling Person and
no other corporate action on the part of any Selling Person is necessary to
authorize the execution, delivery and performance of this Agreement by such
Selling Person and the consummation by such Selling Person of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
Selling Person and, assuming the due execution of this Agreement by Purchaser,
is a valid and binding obligation of each such Selling Person, enforceable
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against such Selling Person in accordance with its terms, except to the extent
that its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles.
Section 1.3 Consents and Approvals; No Violations. Assuming (i) that
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filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), are made and the waiting period thereunder has been
terminated or has expired, (ii) the making of such other antitrust or
competition law filings as are required under applicable law and the termination
and/or expiration of any waiting period or the receipt of any requisite
clearances related thereto, and (iii) the obtaining of such other applications,
registrations, declarations, filings, authorizations, orders, consents and
approvals as are set forth in Schedule 1.3(a) attached hereto, the execution and
delivery of this Agreement by each Selling Person and the consummation by each
Selling Person of the Sale and the other transactions contemplated hereby (a)
will not violate the provisions of the charter, by-laws or other organic
documents of any Selling Person, (b) will not violate any statute, rule,
regulation, order or decree of any public body or authority by which any
Selling Person is bound or by which any of their respective properties or assets
are bound, (c) will not require any filing with, or permit, consent or approval
of, or the giving of any notice to, any governmental or regulatory body, agency
or authority on or prior to the Closing Date (as defined in Section 4.3), and
(d) except as set forth in Schedule 1.3(d) attached hereto, will not result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
Encumbrance upon any of the properties or assets of any Selling Person under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
any other instrument or obligation to which any Selling Person is a party, or by
which it or any of their respective properties or assets may be bound, excluding
from the foregoing clauses (b), (c) and (d) filings, defaults, conflicts and
liens the existence of which, would not prevent any Selling Person from
performing its obligations hereunder or prevent, or establish any materially
burdensome condition on, the consummation of the Sale and the other transactions
contemplated by this Agreement.
Section 1.4 Broker's or Finder's Fees. No agent, broker, firm or
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other Person acting on behalf of any Selling Person or the Company is, or will
be, entitled to any commission or broker's or finder's fees from any of the
parties hereto, or from any Person controlling, controlled by or under common
control with any of the parties hereto, in connection with any of the
transactions contemplated herein, except for
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Lazard Freres & Co. LLC ("Lazard Freres"), whose fees, expenses and any other
amounts due to Lazard Freres or any of its officers, directors, employees or
affiliates thereunder will be paid by the Selling Group. On or prior to the
Closing the Selling Group shall cause Lazard Freres to release the Company from
any and all indemnities, howsoever, arising, owing by the Company to Lazard
Freres (or if such release is not obtained, the Selling Group shall indemnify
the Company for any such indemnities so paid by the Company).
ARTICLE II
REPRESENTATIONS OF THE COMPANY
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The Company represents and warrants as follows:
Section 2.1 Authorization and Validity of Agreement. The Company has
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full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement by the Company have been duly authorized and approved by the
Board of Directors of the Company and no other corporate action on the part of
the Company is necessary to authorize the execution, delivery and performance of
this Agreement by the Company. This Agreement has been duly executed and
delivered by the Company and, assuming the due execution of this Agreement by
the other parties hereto, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization and similar laws affecting the enforcement of
creditors' rights generally and to general equitable principles.
Section 2.2 Consents and Approvals, etc. Assuming (i) that filings
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required under the HSR Act are made and the waiting period thereunder has been
terminated or has expired, and (ii) obtaining of such other applications,
registrations, declarations, filings, authorizations, orders, consents and
approvals as are set forth in Schedule 2.2(a) attached hereto, the execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Sale and other transactions contemplated hereby (a) will not violate the
provisions of the Certificate of Incorporation or By-laws of the Company, (b)
will not violate any statute, rule, regulation, order or decree of any public
body or authority by which the Company or any Subsidiary (as hereinafter
defined) is bound or by which any of their respective properties or assets are
bound, (c) will not require any filing with, or permit, consent or approval of,
or the giving of any notice to, any United States governmental or regulatory
body, agency or authority on or prior to the Closing Date and (d) except as
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set forth in Schedule 2.2(d) attached hereto, will not result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any Encumbrance
upon any of the properties or assets of the Company or any Subsidiary under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or any other
instrument or obligation to which the Company or any Subsidiary is a party, or
by which it or any of their respective properties or assets may be bound,
excluding from the foregoing clauses (b), (c) and (d) filings, notices, permits,
consents and approvals the absence of which, and violations, breaches, defaults,
conflicts and liens the existence of which, in the aggregate, would not have a
material adverse effect on the business, financial condition or results of
operations of the Company and the Subsidiaries (as such term is defined herein)
taken as a whole (a "MATERIAL ADVERSE EFFECT").
Section 2.3 Existence and Good Standing. (a) The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
conduct its business, and, to the extent such concept is applicable, is in good
standing in each jurisdiction in which the character or location of the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so duly
qualified or licensed would not have a Material Adverse Effect.
(b) Each Material Subsidiary is a corporation duly organized, validly
existing and, to the extent such concept is applicable, is in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Each Subsidiary is duly qualified
or licensed as a foreign corporation to do business and, to the extent such
concept is applicable, is in good standing in each jurisdiction in which the
character or location of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect. As used in this Agreement, (i) "SUBSIDIARY" shall mean
any Person of which the Company (either alone or together with other
Subsidiaries of the Company) owns, directly or indirectly, more than 50% of the
stock or other equity interests that are generally entitled to vote for the
election of the board of directors or other governing body of such Person, (ii)
"MATERIAL SUBSIDIARY" shall mean any Subsidiary that is a Significant Subsidiary
of the Company within the meaning of Rule 102 of Regulation S-X under the
Securities Exchange Act of 1934, as amended, and (iii)
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"Person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or other department or agency thereof.
Section 2.4 Capital Stock: Indebtedness. (a) The company has an
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authorized capitalization consisting of 1,000 shares of common stock, par value
$1.00. a share, of which 10 shares are issued and outstanding. All such
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. There are no outstanding subscriptions, options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements providing for the purchase, issuance or sale of any
shares of the capital stock of the Company, other than as contemplated by this
Agreement.
(b) Schedule 2.4(b) attached hereto sets forth in the aggregate all
Indebtedness of the Company and its Subsidiaries which will remain outstanding
after the Closing Date and, in the case of any issue of such Indebtedness of
$500,000 or more, specifically identifies the agreements pertaining to such
Indebtedness and the principal amount thereof outstanding on the date hereof
under each such agreement. As used in this Agreement, "INDEBTEDNESS" shall mean
and include (i) indebtedness for borrowed money, (ii) indebtedness representing
reimbursement obligations for outstanding letters of credit, (iii) capitalized
lease obligations and (iv) the deferred purchase price of property that is
required under generally accepted accounting principles to be set forth as a
liability on a consolidated balance sheet of the Company.
(c) Schedule 2.4(c) attached hereto sets forth all Indebtedness of the
Company and its Subsidiaries which, assuming payment of the Purchase Price as
provided in Section 4.2, will be repaid in full upon the consummation of the
Sale (the "TERMINATING DEBT") and identifies the agreements pertaining to such
Indebtedness and the principal amount thereof outstanding on the date hereof
under each such agreement.
Section 2.S Subsidiaries. Set forth on Schedule 2.5 attached hereto is
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an accurate and complete list of all Material Subsidiaries. The Company is,
directly or indirectly, the record owner of the percentage of the shares of
capital stock of each Material Subsidiary that is listed opposite such
Subsidiary on Schedule 2.5. No capital stock of any Subsidiary is or may become
required to be issued, transferred or sold for any reason and all of the
outstanding shares of capital stock of each Subsidiary are validly issused,
fully paid and nonassessable and are owned free and clear of any Encumbrance
with respect thereto other than Permitted Encumbrances (as defined in Section
2.7).
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Section 2.6 Financial Statements and No Material Changes. (a) The
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Selling Group has heretofore furnished Purchaser with the consolidated balance
sheets of the Company and its Subsidiaries as at December 31, 1995 and 1994 (the
balance sheet as at December 31, 1995 being hereinafter referred to as the
"BALANCE SHEET") and the related consolidated statements of operations, changes
in stockholder's equity and cash flows for the periods then ended, audited by
Price Waterhouse LLP (the "FINANCIAL STATEMENTS"). Such Financial Statements
including the footnotes thereto, except as indicated therein, have been prepared
in accordance with generally accepted accounting principles and fairly present
in all material respects the financial position of the Company and the
Subsidiaries and the results of their operations and cash flows at such dates
and for such periods.
(b) Other than (i) as set forth on schedule 2.6(b) attached hereto,
(ii) any change resulting from general economic, financial or market conditions,
(iii) any change resulting from conditions or circumstances generally affecting
the business in which the Company and/or its Subsidiaries operate (including
losses resulting from the release of films in the ordinary course of business)
or (iv) any change resulting from Purchase's refusal to grant any consent
necessary for Seller to act pursuant to the second sentence of Section 5.1
hereof, since December 31, 1995 (the "BALANCE SHEET DATE"), there has been no
material adverse change in the assets or liabilities or in the business,
financial condition or results of operations of the Company and the Subsidiaries
taken as a whole.
Section 2.7 Title to Properties. Except as set forth on Schedule 2.7
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attached hereto, and except for properties and assets reflected on the Balance
Sheet, or acquired since the Balance Sheet Date, which have been sold or
otherwise disposed of in the ordinary course of business, each of the Company
and the Subsidiaries has good title to, or holds by valid lease or license, all
its material properties and assets, including, without limitation, all the
material properties and assets reflected on the Balance Sheet, subject to no
Encumbrance except for (1) Encumbrances reflected on the Balance Sheet, (2)
Encumbrances arising by operation of law, (3) Encumbrances for current taxes,
assessments or governmental charges or levies on property not yet due and
delinquent or the validity of which are being contested in good faith by
appropriate proceedings, (4) liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of such property by the Company or
its Subsidiaries in the operation of its business, (5) liens securing
Indebtedness that will be terminated concurrently with the consummation of the
Sale, and (6) Encumbrances which do not have a Material Adverse Effect
(Encumbrances of the type described in clauses (1) through (6) above, inclusive,
are hereinafter sometimes referred to as "PERMITTED ENCUMBRANCES").
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Section 2.8 Material Contracts. Set forth on Schedule 2.8 attached
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hereto are all the agreements, contracts or commitments of the Company and the
subsidiaries that are material to the Company and its Subsidiaries taken as a
whole. Neither the Company nor any Subsidiary has violated any contract or
agreement set forth in Schedule 2.8 in any material respect.
Section 2.9 Litigation. Except as set forth in Schedule 2.9 attached
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hereto, there is no claim, action, suit or proceeding or, to the knowledge of
the Company, investigation at law or in equity by any Person or any arbitration
or any administrative or other proceeding by or before any governmental body,
instrumentality or agency, pending or, to the knowledge of the Company,
threatened in writing against the Company or any Subsidiary which is reasonably
likely to have a Material Adverse Effect.
Section 2.10 Intellectual Property. The Company and its Subsidiaries
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own or possess adequate licenses or other valid rights to use all material
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, trade secrets, applications for trademarks
and for service marks, know-how and other proprietary rights and information
used or held for use in connection with the business of the Company and its
Subsidiaries as currently conducted or as contemplated to be conducted, and the
Company is unaware of any assertion or claim challenging the validity of any of
the foregoing which, individually or in the aggregate, would have a Material
Adverse Effect. The conduct of the business of the Company and its Subsidiaries
as currently conducted does not conflict in any way with any patent, patent
right, license, trademark, trademark right, trade name, trade name right,
service ▇▇▇▇ or copyright of any third party that, individually or in the
aggregate, would have a Material Adverse Effect. To the best knowledge of the
Company, there are no infringements of any proprietary rights owned by or
licensed by or to the Company or any Subsidiary which, individually or in the
aggregate, would have a Material Adverse Effect.
Section 2.11 Taxes. (a) Tax Returns. The Company and each of its
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Subsidiaries has filed or caused to be filed or will file or cause to be filed
with the appropriate taxing authorization all material returns, statements,
forms and reports ("RETURNS") For Taxes that are required to be filed by, or
with respect to, the Company and its Subsidiaries on or prior to the Closing
Date. As used herein, "TAX" or "TAXES" shall mean all taxes, assessments,
charges, duties, fees, levies or other governmental charges, including, without
limitation, all U.S. federal, state, local and foreign income, franchise,
profits, capital gains, capital stock, transfer, sales, use, value added,
occupation, property, excise, severance, windfall profits, stamp, license,
payroll, social security, withholding and other taxes, or other governmental
assessments, duties, fees,
-8-
levies or charges of any kind whatsoever, all estimated taxes, deficiency
assessments, additions to tax, penalties and interest.
(b) Payment of Taxes. All material Tax liabilities of the Company and
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its subsidiaries or for which the Company or any of its Subsidiaries may be
liable for all taxable years or other taxable periods (including portions
thereof) ending on or prior to the Closing Date have been paid except for any
such Taxes for which adequate accruals or reserves have been made on thc books
and records of the Company and its Subsidiaries.
(c) Other Tax Matters. (i) Schedule 2.11 attached hereto sets forth (A)
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each taxable year or other taxable period of the Company and its Subsidiaries
for which an audit or other examination of Taxes by any taxing authority is
currently in progress, (B) the taxable years or other taxable periods of the
Company and its Subsidiaries which, for tax purposes, will not be subject to the
normally applicable sate of limitations because of waivers or agreements given
by Parent, Seller, the company or its Subsidiaries and (C) a list of all written
notices received by Parent, Seller, the Company or its Subsidiaries from any
taxing authority pertaining to the commencement of a Tax audit or asserting
a Tax liability of the Company or its Subsidiaries but, in the case of clauses
(A) and (C) above, only to the extent that if determined adversely to the
Company or its Subsidiaries could result in a material Tax liability of the
Company or its Subsidiaries after the Closing Date.
(ii) Except as provided on Schedule 2.11, neither the Company, nor any
of its Subsidiaries has been included in any "consolidated," "unitary" or
"combined" Return provided for under the laws of any jurisdiction with respect
to Taxes for any taxable period for which the statute of limitations has not
expired.
(iii) Except as disclosed on Schedule 2.11, there are no tax sharing,
tax allocation or tax indemnity agreements in effect between the Company or any
of its Subsidiaries and any other party under which Purchaser, the Company or
any Subsidiary could be liable for any material Taxes or other claims of any
party which could result in a material liability to the Company or any of its
Subsidiaries after the Closing Date.
(iv) Except as provided in Schedule 2.11, since January 1, 1996 neither
the company nor any of its Subsidiaries has made any payments pursuant to the
tax sharing agreement listed on such Schedule.
Section 2.12 Conduct of Business. Since the Balance Sheet Date, except
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(a) as set forth on Schedule 2.12 attached hereto or (b) as contemplated or
expressly
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required or permitted by this Agreement, the Company has not taken any action
which, if taken subsequent to the execution of this Agreement and on or prior to
the Closing Date, would constitute a material breach of the Company's agreements
set forth in Section 5.1.
Section 2.13 Compliance with Laws: Permits. (a) The Company and each
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subsidiary are in compliance in all material respects with all material
applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply would not have a Material Adverse Effect.
(b) The Company and each of the Subsidiaries possesses all licenses,
certificates of authority, permits or other authorizations (a "LICENSE")
necessary for the ownership of its properties and the conduct of its business as
presently conducted in each jurisdiction in which the Company and such
Subsidiary is required to possess a License, except where the failure to possess
such a License would not have a Material Adverse Effect. All such Licenses are
in full force and effect and neither the Company nor any Subsidiary has received
any written notice of any event, inquiry, investigation or proceeding
threatening the validity of such Licenses, except where the failure of such
Licenses to be in full force and effect or such event, inquiry, investigation or
proceeding would not have a Material Adverse Effect.
Section 2.14 Employee Benefit Plans. Each "employee benefit plan" (as
----------------------
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or contributed to by the Company or any of
its Subsidiaries (each, a "PLAN" and collectively, the "PLANS") is listed on
Schedule 2.14 attached hereto. Except as set forth on such Schedule, or to the
extent that any breach of the representations set forth in this sentence would
not have a Material Adverse Effect: (a) each Plan is in compliance with
applicable law and has been administered and operated in accordance with its
terms; (b) each Plan which is intended to be "qualified" (within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")),
has received a favorable determination letter from the Internal Revenue Service
and, to the knowledge of the Company, no event has occurred and no condition
exists which could reasonably be expected to result in the revocation of any
such determination letter; (c) no "reportable event" (within the meaning of
Section 4043(c) OF ERISA) for which the 30-day notice requirement has not
been waived by the Pension Benefit Guaranty Corporation (the "PBGC") has
occurred with respect to a Plan; (d) no Plan subject to Title IV of ERISA has
been terminated or is or has been the subject of termination proceedings
pursuant to Title IV of ERISA; (e) full payment has been made of all amounts
which the Company or any of its Subsidiaries was required to have paid under the
terms of any Plan as contributions to such Plan on or prior to the date hereof
(excluding any amounts not yet due) and no
-10-
Plan has incurred an "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived; (f)
to the knowledge of the Company, no "disqualified person" or "party in interest"
(as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transaction in connection with a Plan that
could reasonably be expected to result in the imposition of a penalty pursuant
to Section 502(i) of ERISA or a tax pursuant to Section 4975(a) of the Code; (g)
no liability, claim, action or litigation, has been commenced or, to the
knowledge of the Company, threatened with respect to any Plan (other than claims
for benefits payable submitted in the ordinary course and for the payment of
PBGC insurance premiums in the ordinary course); (h) with respect to each Plan
which is subject to Title IV of ERISA, as of the date of the most recent
actuarial valuation performed therefor, the aggregate present value of the
accrued liabilities thereof did not exceed the aggregate fair market value of
the assets allocable thereto; and (i) neither the Company nor any of its
Subsidiaries has, or expects to incur, any withdrawal liability under Section
4201 or 4204 of ERISA with respect to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA).
Section 2.15 Transactions with Affiliates. Schedule 2.15 attached
------------------------------
hereto identifies all material contracts, commitments and agreements in effect
as of the date hereof and which will continue in effect after the consummation
of the Sale, by and between the Company or any Subsidiary on the one hand and
Seller or any of its Affiliates (other than the Company and the Subsidiaries) on
the other. As used in this Agreement, an "AFFILIATE" shall mean any Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with another Person, and, with respect to the Purchaser, shall
include in any event Tracinda Corporation and its Affiliates and Seven Network
Limited and its Affiliates.
Section 2.16 Insurance. Schedule 2.16 attached hereto contains a list
---------
of the material policies and contracts for property and casualty insurance
maintained by the Company and its Subsidiaries. All such policies are in full
force and effect. The Company will use its reasonable efforts to keep or cause
to be kept such policies (or substantial equivalents) in such amounts duly in
force until the Closing Date and shall give Purchaser notice of any material
change in such policies.
-11-
ARTICLE III
REPRESENTATIONS OF PURCHASER
----------------------------
Purchaser represents and warrants as follows:
Section 3.1 Existence and Good Standing of Purchaser: Authorization.
-------------------------------------------------------
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) Purchaser has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this agreement by Purchaser, and the consummation by it of the transactions
contemplated hereby, have been duly authorized and approved by its Board of
Directors and no other corporate or shareholder action on the part of Purchaser
or its shareholders is necessary to authorize the executed, delivery and
performance of this Agreement by Purchaser and the consummation of the Sale and
the other transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser and, assuming the due execution of this
Agreement by Seller, is a valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles.
Section 3.2 Consents and Approvals: No Violations. Assuming that (i)
-------------------------------------
the filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired, (ii) the making of such other
antitrust and competition law filings as are required under applicable law and
the termination and/or expiration of any waiting period or the receipt of any
requisite clearances related thereto and (iii) the making or obtaining of such
other applications, registrations, declarations, filings, authorization, orders,
consents and approvals as are set forth in Schedule 3.2 attached hereto, the
execution and delivery of this Agreement by Purchaser and the consummation
of the transaction contemplated hereby (a) will not violate any provisions of
the Certificate of Incorporation or By-Laws of Purchaser, (b) will not violate
any statute, rule, regulation, order or decree of any public body or authority
by which Purchaser is bound or by which any of its properties or assets are
bound, (c) will not require any filing with, or permit, consent or approval of,
or the giving of any notice to, any governmental or regulatory body, agency or
authority on or prior to the Closing Date and (d) will not result in a
violation or breach of, conflict with, constitute (with or
-12-
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, payment or acceleration) under, or result in
the creation of any Encumbrance upon any of the properties or assets of
Purchaser under, any of the terms conditions or provisions of any note, bond,
mortgage, indenture, license, franchise, permit, agreement, lease, franchise
agreement or any other instrument or obligation to which Purchaser is a party,
or by which it or any of its properties or assets may be bound, excluding from
the foregoing clauses (b), (c) and (d) filings, notices, permits, consents and
approvals the absence of which, and violations, breaches, defaults, conflicts
and Encumbrances the existence of which, would not prevent Purchaser from
performing its obligations under this Agreement or prevent, or establish any
materially burdensome condition on, the consummation of the Sale and the other
transactions contemplated by this Agreement.
Section 3.3 Purchase for Investment. Purchaser will acquire the Stock
-----------------------
solely for its own account for investment and not with a view toward any resale
or distribution thereof. Purchaser agrees that the Stock may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act of 1933, 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. Purchaser 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 Stock. Purchaser confirms that the Company and the Selling Group
have made available to Purchaser the opportunity to ask questions of the
officers and management employees of the Company and to acquire additional
information about the business and financial condition of the Company and its
Subsidiaries.
Section 3.4 Available Funds. Purchaser has provided to the Selling
-----------------
Group true and correct copies of executed commitment letters ("PURCHASER'S
FINANCING COMMITMENTS") pursuant to which the persons named therein
have agreed to provide S900 million of equity financing, $450 million of term
debt financing and $350 million of revolving credit, in each case on the terms
and subject to the conditions set forth therein, which financing will provide
Purchaser with sufficient funds to perform all of its obligations under this
Agreement, including, without limitation, to make the payments specified in
Sections 4.2 and 4.3(a) hereof.
SECTION 3.5 Litigation. There is no action, suit or proceeding, at law
----------
or in equity by any Person or any arbitration or any administrative or other
proceeding before any governmental body or instrumentality or agency, pending
or, to the knowledge of the Purchaser, threatened in writing, which is
reasonably likely to have
-13-
a material adverse effect on Purchaser's ability to consummate the Sale and the
other transactions contemplated by this Agreement.
Section 3.6 No Outside Reliance. Purchaser has not relied and is not
-------------------
relying upon any statement or representation not made in this Agreement or a
Schedule hereto or in any certificate or document required to be provided by the
Company or the Seller pursuant to this Agreement.
Section 3.7 Broker's or Finder's Fees. No agent, broker, firm or other
-------------------------
Person acting on behalf of Purchaser is, or will be, entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein, except
for ▇.▇. ▇▇▇▇▇▇, whose fees, expenses and any other amounts due to ▇.▇. ▇▇▇▇▇▇
or any of its officers, directors, employees or affiliates thereunder will be
paid by Purchaser and no Selling Person shall be liable for any thereof.
ARTICLE IV
SALE OF STOCK
-------------
Section 4.1 Sale of Stock. Subject to the terms and conditions herein
-------------
stated, Seller agrees to sell, assign, transfer and deliver to Purchaser on the
Closing Date, and Purchaser agrees to purchase from Seller on the Closing Date,
all of the shares of Stock owned by Seller. The certificate representing the
Stock shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by Seller.
Section 4.2 Price. In consideration for the purchase by Purchaser of
-----
the Stock, on the Closing Date, Purchaser shall pay to Seller the aggregate
amount (the "PURCHASE PRICE") of $100,000 (with such amount to be increased to
the extent that the amount paid by the Purchaser on the Closing Date pursuant to
Section 4.3(a) is less than $1,299,900,000), such payment to be made by wire
transfer of immediately available funds to an account of Seller designated in
writing to Purchaser not later than two business days prior to the Closing Date.
Section 4.3. Terminating Debt. etc. (a) As a condition to the
---------------------
consummation of the Sale, on the Closing Date and simultaneously with the
payment by Purchaser of the Purchase Price pursuant to Section 4.2, Purchaser
shall wire transfer directly to the accounts of those creditor banks designated
in writing to Purchaser not less than two business days prior to the Closing
Date an amount equal
-14-
to the lesser of (x) $1,299,900,000 and (y) the principal amount of the
Terminating Debt on the Closing Date plus all interest accrued and unpaid
thereon as of the Closing Date other than interest accrued and unpaid under the
Credit Agreement dated as of September 16, 1994 with The Chase Manhattan Bank as
Agent (the "CMB AGREEMENT"), allocated among such creditor banks as specified
in such writing (provided that the principal debt under the CMB Agreement shall
be repaid first) in satisfaction of the Terminating Debt so paid (with the
accrued and unpaid interest under the CMB Agreement to be paid on the Closing
Date directly by the Company), and any Terminating, Debt remaining unpaid after
giving effect to such payment will be satisfied, cancelled and/or extinguished
at or before the Closing on a mutually satisfactory basis; provided, however,
that in no event shall the aggregate amount required to be paid by Purchaser
pursuant to Section 4.2 and this Section 4.3(a) exceed $1.3 billion.
(b) On the Closing Date and simultaneously with the payment of the
Purchase Price pursuant to Section 4.2, all obligations (direct, indirect and/or
contingent but not including any obligation owing under this Agreement or any
Terminating Debt) owing by the Company or its Subsidiaries to the Selling
Persons, Credit Lyonnais S.A. or their affiliates (collectively the "SELLING
PARTIES") shall be set-off against all obligations (direct, indirect and/or
contingent but not including any obligation owing under this Agreement) owing by
the Selling Parties to the Company or its Subsidiaries and all such obligations
that remain after such set-off shall be cancelled and of no further effect.
Section. 4.4 Closing. The closing of the Sale referred to in Section
-------
4.1 (the "CLOSING") shall take place at 10:00 A.M. at the offices of White &
Case, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ on September 17, 1996,
or at such other time, date and place (not later than October 30, 1996) as the
parties hereto shall by written instrument designate. Such time and date are
herein referred to as the "CLOSING DATE". The parties hereby agree that the
effective time of the Closing for Federal income tax purposes shall be at 12:01
a.m. on the Closing Date.
ARTICLE V
CERTAIN AGREEMENTS
------------------
Section 5.1 Conduct of Business of the Company. During the period from
----------------------------------
the date of this Agreement to the Closing Date, the Company will conduct its
operations and will cause the Subsidiaries to conduct their respective
operations in the ordinary course of business. Notwithstanding the immediately
preceding sentence,
-15-
pending the Closing Date and except as may be first approved by Purchaser (such
approval not to be unreasonably withheld) or as is otherwise permitted,
contemplated or required by this Agreement or set forth on Schedule 5.1 hereto,
(a) the Company's and the Subsidiaries' respective Certificates of Incorporation
and By-Laws will be maintained in their respective forms on the date of this
Agreement, (b) the compensation payable or to become payable by the Company and
the Subsidiaries to any of their directors, officers or employees being paid
$1,000,000 per year or more will be maintained at the amount existing on the
date of this Agreement except for normal periodic increases in the ordinary
course of business consistent with past practice, (c) the Company and the
Subsidiaries will refrain from making any bonus, pension, retirement or
insurance payment or arrangement to or with any such Persons except those that
have been accrued or accrue in the ordinary course of business (including,
without limitation, any payments to employees under the MGM Savings Plan, the
MGM Retirement Plan, the MGM Retirement Plan for Canadian Employees, the MGM
Management Incentive Plan, the MGM Group Insurance Plan, the MGM Dependent Care
Plan and each of the Benefit Assurance Programs referred to in Section 5.5), (d)
the Company and the Subsidiaries will refrain from entering into any material
contract or commitment except material contracts and commitments in the ordinary
course of business, (e) the Company and the Subsidiaries will refrain from
increasing their indebtedness for borrowed money, except borrowings in the
ordinary course of business, (f) the Company and the Subsidiaries will refrain
from cancelling or waiving any claim or right of substantial value which
individually or in the aggregate is material to the Company and the Subsidiaries
taken as a whole, other than in the ordinary course of business, (g) the Company
will refrain from declaring or paying any dividends in respect of any capital
stock of the Company or redeem, purchase or otherwise acquire any of the
Company's capital stock (except for dividends described on Schedule 5.1 attached
hereto), (h) the Company and the Subsidiaries will refrain from making any
material change in accounting methods or practices, except as required by law or
generally accepted accounting principles, (i) the Company and the Subsidiaries
will refrain from issuing or selling any shares of their capital stock or any
other securities, or issuing any securities convertible into, or options,
warrants or rights to purchase or subscribe to, or entering into any arrangement
or contract with respect to the issue and sale of, any shares of their capital
stock or any other securities, or making any other changes in their capital
structures, except for issuances or commitments by any Subsidiary to issue any
such securities to the Company or any other Subsidiary, (j) the Company and the
Subsidiaries will refrain from settling any pending litigation, other than any
settlement which will not have a Material Adverse Effect, (k) except as required
by, or to give effect to, any liquidation of Parent as provided for in Section
ll.15, Parent and Seller, as applicable, and the Company and its Subsidiaries
will refrain from (i) the making or changing of any material Tax election with
respect to the Company or any of its Subsidiaries or the filing of any Tax
Return which is not
-16-
consistent with the prior practice of the Company and its Subsidiaries, as
applicable, and (ii) the settling of any material liability for Taxes of the
Company or any of its Subsidiaries, and (1) the Company and the Subsidiaries
will not agree, whether or not in writing, to do any of the foregoing.
Section 5.2 Review of the Company: Access to Properties and Records.
-------------------------------------------------------
(a) Purchaser may, prior to the Closing Date, through its representatives,
review the properties, books and records of the Company and the Subsidiaries to
familiarize itself with such properties and the business of the Company and the
Subsidiaries. The Company will permit Purchaser and its representatives to have
reasonable access to the premises and to the books and records of the Company
and the Subsidiaries during normal working hours and upon reasonable notice to
conduct such review; provided, however, that such investigation shall not
--------
unreasonably disrupt the personnel and operations of the Company or its
Subsidiaries. The parties hereto acknowledge that PurchaSer (or an Affiliate of
Purchaser) and Lazard Freres (on behalf of CDR and the Company) have entered
into a Confidentiality Agreement dated as of July 16, 1996 (the "CONFIDENTIALITY
AGREEMENT") and Purchaser confirms that it and its Affiliates will
comply with their respective obligations thereunder and that information
obtained during any such review will be subject to the terms of the
Confidentiality Agreement.
(b) Until the Closing Date, Purchaser shall promptly inform CDR and
the Company in writing of any material variances discovered by Purchaser or its
representatives in the representations and warranties of the Selling Group and
the Company contained in this Agreement.
Section 5.3 Reasonable Best Efforts. Each of the parties hereto
-----------------------
agrees to use its reasonable best efforts to take, or cause to be taken, all
action to do or cause to be done, and to assist and cooperate with the other
company hereto in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, but not limited to, (a) compliance
with the HSR Act in all respects (including the filing of a notification and
report form), (b) compliance with other applicable antitrust or competition laws
or statutes, if any, (c) the obtaining of all necessary waivers, consents and
approvals from governmental or regulatory agencies or authorities and the making
of all necessary registrations and filings and the taking of all reasonable
steps as may be necessary to obtain any approval or waiver from, or to avoid any
action or proceeding by, any governmental agency or authority, (d) the obtaining
of all necessary consents, approvals or waivers from third parties and (e) the
defending of any lawsuits or any other legal proceedings whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions con-
-17-
templated hereby including, without limitation, seeking to have any temporary
restraining order entered by any court or administrative authority vacated or
reversed.
Section 5.4 Directors' and Officers' Indemnification. (a) The
----------------------------------------
provisions of the Certificate of Incorporation and By-laws of the Company and of
each Subsidiary concerning elimination of liability and indemnification of
directors and officers shall not be amended in any manner that would adversely
affect the rights thereunder of any Person that is as of the date hereof an
officer or director of the Company or of any such Subsidiary. Upon the
consummation of the Sale, Purchaser shall assume and become liable for, jointly
and severally with the Company and each Subsidiary, any liability and all
obligations of the Company and each Subsidiary under such provisions.
(b) For six years from the Closing Date, the Company (and each
Subsidiary) shall maintain, and Purchaser shall cause the Company and each
Subsidiary to maintain, officers' and directors' liability insurance covering
the Persons who are presently covered by the Company's (and any Subsidiary's)
officers' and directors' liability insurance policies (copies of which have
heretofore been delivered to Purchaser) with respect to actions and omissions
occurring prior to the Closing Date, on terms which are not materially less
favorable than the terms of such current insurance in effect for the Company on
the date hereof; provided, however, that in no event shall the Company be
required to expend more than an amount per year equal to 150% of the current
annual premiums paid by the Company (the "PREMIUM AMOUNT") to maintain or
procure insurance coverage pursuant hereto, and further provided that if the
Company is unable to obtain the insurance called for by this Section 5.4(b), the
Company will obtain as much comparable insurance as is available for the Premium
Amount per year.
(c) Notwithstanding the foregoing, the Selling Group shall be liable
to indemnify the Company's officers and directors as, and to the extent,
provided in Section 9.2(a) and, to the extent such officers and/or directors are
entitled to such indemnification, the Company and the Purchaser shall have no
duty to make payments to such directors and officers under this Section 5.4,
provided that it is understood that the Selling Group will not have to make
indemnity payments under Section 9.2(a) to the extent any director or officer
has actually been paid pursuant to any insurance maintained pursuant to Section
5.4(b) with respect to the Damages (as defined in Section 9.2(a)) being
indemnified. To obtain the benefits of any such indemnification by the Selling
Group with respect to any claim or action covered by any liability insurance
policy, a claim must be made under such insurance policy by the Company and/or
the relevant director and/or officer. To the extent a claim under any such
insurance policy has been made and not yet paid the Selling Group will make any
-18-
indemnification payment under Section 9.2(a) when due and payable pursuant to
such Section provided that such claim will be pursued by the Company and/or the
indemnified director or officer at the expense and sole risk, of the Selling
Group (or, if possible, such claim will be assigned to a Selling Person to be
pursued by it) which actions shall include commencing, at CDR's request and
expense and sole risk, a lawsuit to collect any such claim to the extent the
Company and/or such director or officer is required to be party to such lawsuit.
Section 5.5 Benefit Assurance Programs. The provisions of the
--------------------------
Employee Benefit Assurance Program, the Management Benefit Assurance Program and
the Senior Management Benefit Assurance Program (collectively the "BENEFIT
ASSURANCE PROGRAMS"), each adopted by the Company as of March 12, 1996 shall not
be amended in any manner that would adversely affect the rights thereunder of
any Person that is as of the date hereof an employee covered by such program
without such affected person's consent. Upon the consummation of the Sale,
Purchaser shall assume and become liable for, jointly and severally with the
Company, all obligations under such program.
Section 5.6 Non-Solicitation of Employees. (a) For a period
-----------------------------
commencing on the date hereof through the third anniversary of the Closing Date,
(i) none of the Selling Group or any of their Affiliates (other than the Company
or any Subsidiary) shall affirmatively seek to hire any officer of the Company
or any Subsidiary in any capacity whatsoever without the express written consent
of Purchaser.
(b) To the extent this Agreement is terminated pursuant to Section
10.1 (b) (to the extent CDR terminates) or (d), for a period commencing on the
date hereof through the third anniversary of such termination, neither Purchaser
nor any of its Affiliates (other than ▇▇▇▇▇ ▇▇▇▇▇▇▇) shall (x) affirmatively
seek to hire any officer of the Company in any capacity whatsoever or (y) while
any such officer is employed by the Company or any of its Affiliates in a
position having greater or substantially the same level of compensation and
responsibility as the position with the Company held by such officer on the date
hereof, hire any officer in any capacity whatsoever without, in either case (x)
or (y), the express written consent of the CDR.
(c) The Selling Group recognizes that the provisions of clause (a) of
this Section 5.6 are reasonable and necessary for Purchaser's protection and
Purchaser recognizes at the provisions of clause (b) of this Section 5.6 are
reasonable and necessary for the protection of the Selling Group. Accordingly,
each of the parties hereto agrees that they each shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of clauses (a)
and (b) of this Section 5.6 and to enforce specifically the terms and provisions
hereof in any action instituted in any court of the
-19-
United States or any state thereof having subject matter jurisdiction in
addition to any other remedy to which such party may be entitled at law or
equity. If it is ever held that the restriction placed on Purchaser or the
Selling Group by this Section 5.6 is too onerous and is not necessary for the
protection of the Company, Purchaser and the Selling Group agree that any court
of competent jurisdiction may impose lesser restrictions which such court may
consider to be necessary or appropriate to properly protect the Company.
Section 5.7 Affected Employees. It is the intention of the parties
------------------
hereto that the employees of the Company and the Subsidiaries (including
employees on vacation leave of absence, disability or layoff) (the "AFFECTED
EMPLOYEES") at the Closing Date will remain employees of the Company and the
Subsidiaries immediately following the Closing Date at the salary levels (or
higher) that were in effect immediately prior to the Closing Date.
Section 5.8 Employee Benefits. (a) Purchaser will, and will cause the
-----------------
Company and the Subsidiaries to, give to each Affected Employee the same service
credit with Purchaser, the Company and the Subsidiaries as each such Affected
Employee previously earned up to the Closing Date for purposes of determining
the Affected Employee's eligibility to participate in, vesting under, benefit
accrual under, eligibility for early distribution of benefits from and
eligibility for early retirement or any subsidized benefit provided for in any
employee benefit plan, practice or policy established, maintained or contributed
to by Purchaser (a "PURCHASER'S PLAN") and shall where appropriate cause each
Purchaser's Plan to reflect the foregoing requirement.
(b) Immediately after the Closing Date, the Affected Employees will be
provided such pension and other employee benefits, which are comparable in all
material respects to and no less favorable in the aggregate than such benefits
provided by the Company or any Subsidiary immediately prior to the Closing Date.
Purchaser shall, effective as of the Closing Date, provide or cause to be
provided, for the Affected Employees medical and dental benefits pursuant to an
employee welfare benefit plan (a "WELFARE PLAN") which Welfare Plan shall not
have any pre-existing condition exclusions. For purposes of computing deductible
amounts (or like adjust adjustments or limitations on coverage under any
Purchaser's Plan which is an "employee welfare benefit plan," as defined in
Section 3(1) of ERISA (a "SUCCESSOR WELFARE PLAN"), including the Welfare Plan,
expenses and claims previously recognized for similar poses under plans of the
Company or any Subsidiary providing similar benefits prior to the Closing Date
shall be credited or recognized under the applicable Successor Welfare Plan.
-20-
(c) Notwithstanding the foregoing, Purchaser will, or will cause the
Company and the Subsidiaries to, perform the obligations of the Company or any
Subsidiary under the Benefit Assurance Programs, as in effect on the date of
this Agreement. Purchaser shall be solely responsible for and shall pay, or
shall cause the Company or a Subsidiary to pay, when due all direct and indirect
damages, costs, expenses and other liabilities in respect of any claim of any
Affected Employee that such Affected Employee's employment has been terminated,
either voluntarily or involuntarily, in conjunction with the transactions
contemplated hereby or otherwise, including, without limitation, any claim for
severance pay, unemployment benefits or any other liabilities, claims, costs,
interest, penalties and fees of legal counsel, asserted against, imposed upon or
incurred by Seller, CDR, Parent or the Company, or any Subsidiary, arising from
or relating in any way to such claims.
Section 5.9. Tax Sharing Agreement. The tax sharing agreement listed
---------------------
on Schedule 2.11 shall be cancelled as of the Closing Date, and the Company and
its Subsidiaries shall thereafter not be bound by, and shall have no obligation
to make any payments pursuant to, such tax sharing agreement, including without
limitation any payments in respect of amounts due with respect to taxable
periods or portions thereof ending on or prior to the Closing Date.
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
The purchase of the Stock by Purchaser on the Closing Date is
conditioned upon the satisfaction or waiver, at or prior to the consummation of
the Sale, of the following conditions:
Section 6.1 Opinion of Seller's Counsel. Purchaser shall have received
---------------------------
an opinion, dated the Closing Date, of White & Case in form and substance to be
agreed upon.
Section 6.2 Truth of Representations and Warranties. The
---------------------------------------
representations and warranties of the Selling Group and of the Company contained
in this Agreement or in any Schedule delivered pursuant hereto shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except to the extent that any such representation and warranty is
stated in this Agreement to be made as of a specific date, in which case such
representation and warranty shall be true and correct as of such specified
date), and each of Seller and the Company, shall have
-21-
delivered to Purchaser a certificate, dated the Closing Date and addressing,
respectively, the status of the representations and warranties of the Selling
Group and the Company to such effect.
Section 6.3 Performance of Agreements. Each and all of the agreements
-------------------------
of the Selling Group and/or the Company to be performed at or prior to the
C1osing Date pursuant to the terms hereof shall have been duly performed in all
material respects, and each of Seller and the Company shall have delivered to
Purchaser a certificate, dated the Closing Date and addressing, respectively,
the status of the agreements of the Selling Group and the Company, to such
effect.
Section 6.4 No Injunction. No court or other government body or public
-------------
authority shall have issued an order which shall then be in effect restraining
or prohibiting the completion of the transactions contemplated hereby.
Section 6.5 Governmental and Other Approvals. All of the governmental
--------------------------------
and other consents and approvals set forth on Schedules 1.3(a) and 2.2 shall
have been received and such approvals shall be in full force and effect. All
waiting periods under the HSR Act and other relevant antitrust or competition
laws or statutes shall have been terminated or expired.
Section 6.6 Resignations. All Persons who are directors of the Company
------------
whose principal employment is not as an officer and/or employee of the Company
and/or any of the Subsidiaries shall have resigned such directorships.
Section 6.7 Purchaser's Financing. At the Closing the Purchaser shall
---------------------
have available to it not less than $900 million of equity financing, $450
million of term debt financing and $350 million of revolving credit on
substantially the terms set forth in the Purchaser's Financing Commitments
heretofore provided to the Selling Group by thc Purchaser.
Section 6.8 Terminating Debt. At Closing and after giving effect to
----------------
the payments made pursuant to Section 4.3(a), no Terminating Debt shall be
outstanding.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
-22-
The sale of the Stock by Seller on the Closing Date is conditioned
upon satisfaction or waiver, at or prior to the consummation of the Sale of the
following conditions:
Section 7.1 Opinions of Purchaser's Counsel. Purchaser shall have
-------------------------------
furnished Seller with an opinion, dated the Closing Date, of counsel
satisfactory to CDR and in form and substance to be agreed upon.
Section 7.2 Truth of Representations and Warranties. The
---------------------------------------
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date, and Purchaser shall have delivered to Seller a certificate,
dated the Closing Date, to such effect.
Section 7.3 Performance of Agreements. Each and all of the agreements
-------------------------
of Purchaser to be performed at or prior to the Closing Date pursuant to the
terms hereof shall have been duly performed in all material respects, and
Purchaser shall have delivered to Seller a certificate, dated the Closing Date,
to such effect.
Section 7.4 No Injunction. No court or other government body or public
-------------
authority shall have issued an order which shall then be in effect restraining
or prohibiting the completion of the transactions contemplated hereby.
Section 7.5 Governmental Approvals. All of the governmental and other
----------------------
consents and approvals set forth on Schedule 3.2 and such approvals shall be in
full force and effect. All waiting periods under the HSR Act and other relevant
antitrust or competition laws or statutes shall have been terminated or expired.
ARTICLE VIII
TAX MATTERS
-----------
Section 8.1 Tax Liabilities. (a) All income Tax liabilities imposed on
---------------
the Company and its Subsidiaries for all taxable years or other taxable periods
or portions thereof ending on or before the Closing Date ("PRE-CLOSING
Periods") shall be for the account of the Selling Group and income tax
liabilities shown on Schedule 8.1(a) shall be for the account of Purchaser,
provided, however, that Purchaser's liability for such Taxes shall be limited to
the amounts set forth in Schedule 8.1(a). The amount paid by the Selling Group
pursuant to the immediately preceding sentence shall
-23-
include all income Taxes imposed on the Company and its Subsidiaries, or for
which the Company and its Subsidiaries may be liable, as a result of any
election to be made by Parent and Purchaser pursuant to Sections 338(g) and
338(h)(10) of the Code and (to the extent such election does not result in the
Selling Group being obligated (directly or as a result of indemnities given
hereunder) for any tax liability in excess of the amount they would be liable
for in the absence of any such election) any analogous provisions of foreign and
United States state and local laws and regulations (collectively "SECTION 338
ELECTIONS") with respect to the purchase of the Stock pursuant to this
Agreement. For this purpose, such income Tax liabilities with respect to a
taxable year or other taxable period which begins on or before and ends after
the Closing Date shall be apportioned between the portion of such period ending
on the Closing Date and the portion beginning on the day after the Closing Date
as though the taxable year or other taxable period of the group terminated at
the close of business on the Closing Date and shall utilize accounting methods,
elections and conventions that do not have the effect of distorting the
allocation of income and expenses within a taxable year or other taxable period.
Except to the extent accounted for as an asset on the Balance Sheet, any refund
of income Taxes for any Pre-Closing Period attributable to the payment of income
Tax liabilities for which the Selling Group is liable pursuant to the first
sentence of this Section 8.1(a) that is received by Purchaser, the Company or
any of its subsidiaries shall be remitted to Parent net of any income Taxes of
the Company or any of its Subsidiaries arising from the receipt of such refund,
within five days of the receipt thereof.
(b) Except as otherwise provided in Section 8.i(a), all Tax
liabilities imposed on the Company and its Subsidiaries and all refunds of Taxes
received by the Company and its Subsidiaries shall be for the account of and
paid by Purchaser and/or the Company, as applicable. In addition, Purchaser
agrees to pay or discharge when due, all liabilities for Taxes described on
Schedule 8.1(a), provided, however, that the Purchaser's obligation with respect
to such Taxes shall not exceed the amounts set forth in such schedule.
Section 8.2 Tax Returns. (a) Parent shall, consistent with past
-----------
practices, include the Company and all eligible Subsidiaries in the consolidated
U.S. federal income tax returns filed by Parent for all Pre-Closing Periods.
Parent shall also prepare, or shall cause to be prepared, and thereafter file
all state, local and foreign income Tax Returns of the Company and its
Subsidiaries that are filed on a consolidated, combined or unitary basis with
the Seller or its Affiliates (other than the Company and its Subsidiaries) to
the extent that such Tax Returns have been filed on a consolidated, combined or
unitary basis in the preceding taxable year. All such Tax Returns shall be
prepared, and all elections with respect to such Tax Returns shall be made, to
the extent permitted by applicable law, in compliance with all applicable laws
-24-
and in a manner consistent with the prior practice with respect to the Company
and its Subsidiaries, as applicable. Parent shall timely pay when due all Taxes
shown as due on all such Tax Returns. In order to facilitate the preparation of
such consolidated, combined and unitary Tax Returns, Purchaser shall, within a
reasonable period of time after Parent's request, provide or cause the Company
and/or its Subsidiaries to provide Parent with such information as Parent shall
identify that is reasonably necessary for preparing the income Tax Returns
described in this Section 8.2(a). Such information shall be submitted in a form
consistent with prior practice which may include the preparation of final draft
of such Tax Returns or portions thereof. Parent and Seller shall not file any
amended Tax Returns with respect to Pre-Closing Periods without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld.
(b) Except as provided in Section 8.2(a), Purchaser shall, or shall
cause the Company and its Subsidiaries to, prepare and file all Tax Returns
required to be filed by the Company and/or its Subsidiaries after the Closing
Date for all taxable years or other taxable periods; provided, however, that no
later than 30 days prior to the extended due date for the filing of any income
Tax Return with respect to any taxable year or other taxable period of the
Company or any of the Subsidiaries beginning on or before the Closing Date and
ending after the Closing Date, the Purchaser shall (a) provide Parent with
written notice, which notice shall set forth Purchaser's calculations regarding
the amount of income Taxes, if any, for which Purchaser determines the Selling
Group is liable pursuant to Section 8.1(a) in sufficient detail and
particularity to enable Parent to verify the amount of such income Taxes, (b)
provide Parent with the draft of such income Tax Return and (c) provide Seller
access to all records of the Company and its Subsidiaries reasonably necessary
to enable Parent and its representatives to evaluate the draft income Tax
Returns provided with such notice. No later than 10 days prior to the extended
due date for the filing of such income Tax Returns, Parent shall notify
Purchaser of any objections Parent may have to Purchaser's calculations
regarding the amount of such income Taxes and to any items set forth in such
draft income Tax Return Purchaser and Parent agree to consult and resolve in
good faith any such objection, it being understood and agreed that in the
absence of any such resolution, any and all such objections shall be resolved by
an independent accounting firm mutually acceptable to Parent and Purchaser by
the due date (including extensions) for such income Tax Returns. If such
resolution is not reached on or prior to such date, Purchaser shall initially
file or cause the Company and its Subsidiaries to initially file such income Tax
Returns based on Purchaser's position with respect to the issues in dispute. The
amount of income Taxes for which the Selling Group is liable pursuant to Section
8.1(a) shall be paid by the Selling Group to Purchaser (for payment over to the
Taxing authority) at least two days prior to the date the corresponding payment
to the Taxing authority is due.
-25-
Section 8.2A. Tax Indemnification. The Selling Group will indemnify
-------------------
and hold harmless Purchaser, the Company and its Subsidiaries from and against
any and all liabilities for:
(i) income Taxes for which the Selling Group is liable pursuant to
Section 8.1(a); and
(ii) income Taxes imposed under Treasury Regulations Section 1.1502-6
(or any analogous provision of foreign, state or local law) with respect to
members of the Selling Group (excluding the Company and its Subsidiaries) or,
imposed with respect to Pre-Closing Periods as a transferee or successor, under
Section 6901 of the Code (or any analogous provision of foreign, state or local
law), by contract, or otherwise;
in each case, together with any related expenses incurred (including, without
limitation, attorneys' and accountants' fees).
Section 8.3 Cooperation: Audits. In connection with the preparation of
-------------------
Tax Returns, audit examinations and any administrative or judicial proceedings
relating to the income Tax liabilities imposed on the Company and its
Subsidiaries for all Pre-Closing Periods, Purchaser, the Company and its
Subsidiaries on the one hand, and Parent and the Seller on the other hand, will
cooperate fully with each other, including, but not limited to, the furnishing
or making available on a timely basis of records, personnel (as reasonably
required), books of account, powers of attorney or other materials necessary or
helpful for the preparation of such income Tax Returns, the conduct of audit
examinations or the defense of claims by taxing authorities as to the imposition
of such income Taxes. Without limiting the generality of the foregoing, Parent
(and its representatives) shall be entitled to examine books and records of the
Company and its Subsidiaries, and Purchaser and the Company (and their
representatives) shall be entitled to examine the books and records of Parent
and Seller, in each case with respect to any Pre-Closing Period, and shall have
reasonable access to personnel of the Company and its Subsidiaries to the extent
necessary or helpful for purposes of preparing or amending any income Tax
Returns (including previously filed income Tax Returns) or obtaining income Tax
refunds with respect to all Pre-Closing Periods.
Parent shall control the conduct of all stages of any audit or other
administrative or judicial proceeding with respect to the income Tax liability
for all Pre-Closing Periods, including such income Tax liability reflected on
all income Tax Returns for any consolidated, combined or unitary group of which
Seller or its Affiliates (other than the Company and its Subsidiaries) and the
Company or any of its
-26-
Subsidiaries are members with respect to any taxable year or taxable period
which, with respect to the Company and its Subsidiaries, ends on or before the
Closing Date but which, with respect to any other member of such consolidated,
combined or unitary group, ends after the Closing Date other than income Tax
liability with respect to Taxes for which accruals are set forth in Schedule
8.l(a); provided, however, that neither the Parent nor its representatives
shall, without the prior written consent of Purchaser, which consent shall not
be unreasonably withheld, enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the income Tax liability of the
Purchaser, the Company or any Subsidiary for any taxable year or other taxable
period (or portion thereof) after the Closing Date. Purchaser shall control the
conduct of all other audits or other administrative or judicial proceedings with
respect to the Tax liability of the Company and its Subsidiaries; provided,
however, that none of Purchaser, the Company, any of the Subsidiaries nor any of
their representatives shall, without the prior written consent of Parent, which
consent shall not be unreasonably withheld, enter into any settlement of any
contest or otherwise compromise any issue that affects or may affect the income
Tax liability of the Selling Group, the Company or any of its Subsidiaries for
any taxable year or other taxable period (or portion thereof) ending on or prior
to the Closing Date. Purchaser and Parent shall promptly forward to the other
all written notifications and other communications from any taxing authority
received by it or its Affiliates which could be expected to give rise to any Tax
audit or other proceeding relating to the Tax liability of the other Person
and/or its affiliates. Purchaser and Parent shall also promptly forward to the
other all written notifications and other written communications from any taxing
authority received by it and its Affiliates relating to any income Tax audit or
other proceeding relating to the income Tax liability of or with respect to the
Company or any of its Subsidiaries for any Pre-Closing Period. The failure of
Purchaser to forward to Parent such written notifications or written
communications shall not excuse the Selling Group from its obligations under
Sections 8.1 and 8.2A with respect to any increased income Tax liability
directly or indirectly attributable to any such written notification or other
communication except to the extent the Selling Group is materially prejudiced by
such failure.
Section 8.4 Section 338. To the extent Purchaser has given CDR
-----------
written notice at least 21 days prior to the Closing Date of its decision to
effect one or more Section 338 Elections, Parent and Purchaser shall jointly
complete and make such Section 338 Elections as specified in such notice with
respect to the Company and its Subsidiaries included in Parent's affiliated
group on Form 8023A and/or in such other manner as may be required by rule or
regulation of the Internal Revenue Service and/or any applicable foreign, state
or local Taxing authority provided, however, that none of Purchaser, the Company
or any of its Subsidiaries shall make an election under (i) Section 338 of the
Code with respect to any non-U.S. Subsidiaries of the Company or
-27-
(ii) any provisions analogous to Code Section 338 under any foreign or United
States state and/or local laws and regulations if such election would result in
any Tax liability to thc Selling Group in excess of the amount of such Taxes
that would result if no such election were made, it being understood that if the
Company or any of its Subsidiaries has the ability to elect out of such
treatment and does not so elect, such failure shall constitute an affirmation
election. Notwithstanding the foregoing, Purchaser, the Company and its
Subsidiaries shall be entitled to make a Section 338 election with respect to
non-U.S. Subsidiaries of the Company and/or under the analogous provision of
foreign, State and local law if Purchaser shall provide to Selling Group an
indemnity in form and substance satisfactory to Parent, for all increased
liabilities resulting to Selling Group from such elections. Parent shall, with
the assistance and cooperation of Purchaser, prepare on a reasonable basis and
in a manner consistent with this Agreement all such Section 338(g) and Section
338(h)(10) election forms and required attachments to Form 8023A in accordance
with applicable law, Parent shall deliver such forms and related documents to
Purchaser at least 90 days prior to the due date of filing. Purchaser shall
deliver to Parent, at least 45 days prior to the due date of filing, such
completed forms as are required to be filed under Section 338 of the Code.
Section 8.5 Valuation and Allocation. To the extent Section 338
------------------------
Elections are to be made as provided in Section 8.4, Parent and Purchaser will
act reasonably and in good faith to reach an agreement promptly after the
Closing Date on an allocation of the "adjusted grossed-up basis" of the Stock
(within the meaning of Treasury Regulations Section 1.338(h)(10)-lT(e)) for the
Company and its Subsidiaries to categories of assets as required for purposes of
Section 338 under the Code. Neither Parent nor Purchaser shall unreasonably
withhold consent to the manner of valuation or allocation employed. If Parent
and Purchaser are unable to reach a mutually acceptable valuation of assets and
allocation of the "adjusted grossed-up basis" within 120 days after the Closing
Date, they shall submit the issue to arbitration by a nationally recognized
accounting firm as shall be mutually acceptable to each of them for resolution
of the disagreement within thirty days, it being agreed that Parent and
Purchaser will jointly share the fees and expenses of such accounting firm. The
valuations and allocations determined pursuant to this Section 8.5 shall be used
for purposes of all relevant Tax Returns, reports and filings, but shall not be
relevant or have any effect on any other provision of this Agreement, except
insofar as these other provisions relate to or affect Taxes or Tax Returns.
-28-
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
--------------------------------------------
Section 9.1 Survival of Representations. Except for the
---------------------------
representations and warranties set forth in Section 1.1, 1.2, 1.3, 1.4, 3.3, 3.6
and 3.7, which shall survive until expiration of the applicable statute of
limitations, the representations and warranties of the Selling Group, the
Company and Purchaser contained in this Agreement shall not survive the Closing
Date.
Section 9.2 Indemnities. (a) Each member of the Selling Group, jointly
-----------
and severally, hereby agrees to indemnify and hold harmless Purchaser, the
Company and/or its Subsidiaries and each of their respective officers,
directors, employees, agents, affiliates and stockholders from and against any
and all liabilities, damages, claims, losses or Expenses ("DAMAGES") suffered or
incurred by any such indemnified party to the extent arising from or
attributable to any (u) breach of any representation or warranty made by a
Selling Person in Section 1.1, 1.2, 1.3 or 1.4, (v) any breach of any covenant
or agreement made or given by any Selling Person in Section 5.6, or Article XI,
(w) any dispute, claim, cause of action or proceeding (including the litigation
listed as Item 1 of Schedule 2.9), at law or in equity or in any arbitration or
other administrative, investigative or other proceeding, wherever initiated,
whether currently pending or threatened or hereafter arising or threatened by or
on behalf of Mr. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (or his successors and heirs and/or any
family member and/or any corporation or business entity controlled by or
affiliated with him or them) or by any creditor of (in such capacity) or any
person claiming through any of the foregoing or any present or former
securityholder or creditor (in each case in such capacity) of Pathe
Communications Corporation or any successor thereto (collectively, the "PARRETTI
LITIGATION") to the extent such Parretti Litigation is based on (i) any action
or activity (other than of the Purchaser and its Affiliates to the extent not
related to the sale of the Stock hereunder) occurring on or prior to the Closing
Date or (ii) any action or activity by Credit Lyonnais SA. or any of its
Affiliates (including any Selling Person) occurring after the Closing Date, (x)
the ownership, operation and/or disposition of the Company's French laboratory
and real estate assets (including SNGTC S.A., SCI la Cite du Cinema and
Participations Immobiliere Europe SARL), (y) the litigation referred to in Items
2, 3 and 4 of Schedule 2.9 (the "SCHEDULED LITIGATION") or any dispute, claim,
cause of action or proceeding, wherever initiated, whether currently pending or
threatened or hereafter arising or threatened by or on behalf of any party to
the Scheduled Litigation (or any successor or heir thereto or any family member
thereof or any corporation or business entity controlled by or affiliated with
any such party) or by any of their respective creditors (in such capacity) or
any person claiming through any of the foregoing to the extent such dispute,
claim, cause of action or
-29-
proceeding is based on or arises out of any activity or action that forms in
whole or in any material part the basis of any of the Scheduled Litigation, and
(z) any liability, claim, cause of action or obligation reserved to Seller or
any of its Affiliates (other than the Company and its Subsidiaries) under the
Contribution Agreement, dated as of December 30, 1993, between Seller and the
Company and all amendments thereto. To the extent that the Selling Group's
undertakings set forth in this Section 9.2(a) may be unenforceable, the Selling
Group shall contribute the maximum amount that it is permitted to contribute
under applicable law to the payment and satisfaction of all Damages incurred by
the parties entitled to indemnification hereunder and the balance of such
indemnification shall be effected by way of a cash refund of a portion of the
consideration paid by Purchaser equal to such balance. The term "EXPENSES" shall
include without limitation, for purposes of this Article IX, all direct and
indirect costs of any type or nature whatsoever (including, without limitation,
any fees and disbursements of an Indemnified Party's counsel, accountants and
other experts) actually and reasonably incurred by the Indemnified Party in
connection with such matter, including the investigation, preparation, defense
or appeal of a third party Claim (as defined below).
(b) Purchaser hereby agrees to indemnify and hold harmless each
Selling Party and each of their respective officers, directors, employees,
agents, affiliates and stockholders against any and all Damages suffered or
incurred by any such indemnified party to the extent arising from or
attributable to any breach of any representation or warranty made by the
Purchaser in Section 3.3, 3.6 or 3.7 of this Agreement. To the extent that the
Purchaser's undertakings set forth in this Section 9.2(b) may be unenforceable,
the Purchaser shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Damages
incurred by the parties entitled to indemnification hereunder and the balance of
such indemnification shall be effected by way of a cash addition to the Purchase
Price in the amount of such balance.
(c) Any party seeking indemnification under this Article IX (an
"INDEMNIFIED PARTY") shall give each party from whom indemnification is being
sought (each, an "INDEMNIFYING PARTY") notice of any matter which such
Indemnified Party has determined has given or could reasonably give rise to a
right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Damages, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or arises
provided, that the failure to provide such timely notice shall not release the
Indemnifying Party from any of its obligations under this Article IX except to
the extent the Indemnifying Party is materially prejudiced by such failure. The
obligations of an Indemnifying Party under this Article IX with respect to
Damages
-30-
arising from any Parretti Litigation and/or any claims of any other third party
which are subject to the indemnification provided for in this Article IX
(collectively, "THIRD PARTY CLAIMS") shall be governed by and contingent upon
the following additional terms and conditions: if an Indemnified Party shall
receive, after the Closing Date, initial notice of any Third Party Claim, the
Indemnified Party shall give the Indemnifying Party notice of such Third Party
Claim within such time frame as necessary to allow for a timely response and in
any event within 45 days (20 days in the case of any Parretti Litigation) of the
receipt by the Indemnified Party of such notice; provided, that the failure to
--------
provide such timely notice shall not release the Indemnifying Party from any of
its obligations under this Article IX except to the extent the Indemnifying
Party is materially prejudiced by such failure. If the Indemnifying Party
acknowledges in writing its obligation to indemnify and hold harmless the
Indemnified Party hereunder against any Damages that may result from such Third
Party Claim, then the Indemnifying Party shall be entitled to assume and control
the defense of such Third Party Claim at its expense and through White & Case
(if the Selling Group are the Indemnifying Party) or, in any case, other counsel
of its choice reasonably satisfactory to the Indemnified Party if it gives
notice of its intention to do so to the Indemnified Party within ten Business
Days of the receipt of such notice from the Indemnified Party; provided,
--------
however, that if there exists or is reasonably likely to exist a conflict of
-------
interest that would make it inappropriate in the judgment of the Indemnified
Party (upon advice of counsel) for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party shall
be entitled to retain its own counsel, in each jurisdiction for which the
Indemnified Party determines counsel is required, at the expense of the
Indemnifying Party, provided that the Indemnified Party and such counsel shall
contest such Third Party Claims in good faith. In respect of all Parretti
Litigation listed on Schedule 9.2, or first commenced after the date hereof and
on or prior to the Closing Date and specified in a supplement to Schedule 9.2
delivered by CDR to Purchaser on the Closing Date, the Selling Group hereby
acknowledges its obligation to indemnify and hold harmless Purchaser, the
Company and its Subsidiaries from all Damages arising therefrom and has elected
to assume and control the defense of such Parretti Litigation subject to the
provisions set forth herein. In the event the Indemnifying Party exercises the
right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnified Party shall cooperate with the Indemnifying
Party in such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Indemnifying Party's expense, all
such witnesses, records,
-31-
materials and information in the Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is reasonably required by the
Indemnified Party. The Indemnifying Party shall not, without the written consent
of the Indemnified Party, (i) settle or compromise any Third Party Claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the Indemnified Party
of unconditional written release from all liability in respect of such Third
Party Claim or (ii) (except in the case of any Parretti Litigation) settle or
compromise any Third Party Claim in any manner that may adversely affect the
Indemnified Party other than as a result of money damages or other money
payments (so long as the Indemnifying Party has acknowledged in writing its
obligation to indemnify and provides the Indemnified Party evidence (reasonably
satisfactory to the Indemnified Party) that the Indemnifying Party will be able
to satisfy such obligations timely). Finally, no Third Party Claim which is
being defended in good faith by the Indemnifying Party or which is being
defended by the Indemnified Party as provided above in this Section 9.2(c) shall
be settled by the Indemnified Party without the written consent of the
Indemnifying Party, which consent will not be unreasonably withheld or delayed.
The failure to satisfy the foregoing terms and conditions shall not release the
Indemnifying Party from its obligations hereunder except to the extent such
failure has materially prejudiced the Indemnifying Party.
(d) The expenses incurred by any Indemnified Party in defending and/or
investigating any Third Party Claim, together with any interest that may accrue
on any such unpaid expenses if not reimbursed when due hereunder, shall be paid
by the Indemnifying Party prior to the final disposition of such Third Party
Claim within 30 days after receiving from the Indemnified Party copies of
invoices presented to the Indemnified Party for such expenses and an undertaking
by or on behalf of the Indemnified Party to repay such amount to the extent it
is ultimately determined that the Indemnified Party is not entitled to
indemnification. Any other Damages, in the form of judgments, fines, penalties,
awards or otherwise, to which an Indemnified Party may become subject in
connection with any Third Party Claim, together with any interest that may
accrue thereon, shall be paid within 30 days after any judgment is rendered or
order is issued (whether or not appealable) imposing such Damages or 30 days
after a settlement is reached in which such Damages are specified, as
applicable. The Indemnifying Party shall be entitled to defer the payment of any
Damages imposed upon an Indemnified Party pursuant to an appealable judgment or
order until a final, non-appealable judgment or order is rendered, provided that
the Indemnified Party posts any appeal bond or other security required in
connection with any such appeal. Any Damages in the nature of severance
payments, legal and financial advisory fees, contractual termination payments or
other contractual obligations incurred by Purchaser, the Company and/or its
Subsidiaries or any of their respective officers, directors, employees and
agents in connection with the matters described in Section 9.2(a)(x),
-32-
together with any interest that may accrue on any such unpaid amounts, shall be
paid by the Selling Group, without the requirement of any judgment, order or
decree of any court, arbitrator or other adjudicating body, within 30 days after
receiving from Purchaser or the Company copies of invoices presented to
Purchaser, the Company or its Subsidiaries covering such Damages provided that
the Selling Group shall not be required to pay such invoice if the Selling Group
disagrees with the contents thereof provided that in such case the Selling Group
shall indemnify the Purchaser, the Company and its Subsidiaries from all Damages
arising from any such rejection or delay in payment.
Section 9.3 Limits on Indemnification. Notwithstanding anything to the
-------------------------
contrary contained in this Agreement, the maximum amount of indemnifiable
Damages which may be recovered from the Selling Group, on the one hand, or the
Purchaser, on the other hand, arising out of or resulting from the causes
enumerated in Section 9.2 shall be $1.3 billion, provided that this limitation
shall not be applicable to amounts payable under Section 9.2(a)(w), which
amounts shall be payable without limitation.
Section 9.4 Tax Matters. Anything in this Article IX to the contrary
-----------
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by Article VIII.
ARTICLE X
TERMINATION
-----------
Section 10.1 Events of Termination. This Agreement may be terminated
---------------------
(a) by mutual written agreement of Purchaser and CDR or (b) either Purchaser or
CDR, to the extent that the Closing Date has not occurred prior to October 30,
1996, provided that the party exercising its right to so terminate this
Agreement shall not have materially breached any of the representations,
warranties, covenants or agreements contained herein (x) of Purchaser, if
Purchaser is terminating or (y) of the Selling Group and the Company, if CDR is
terminating, (c) by Purchaser by written notice to the CDR, if the conditions
set forth in Article VI hereof shall not have been complied with or performed on
or prior to the Closing Date in any material respect and Purchaser shall not
have materially breached any of its representations, warranties, covenants or
agreements contained herein, or (d) by CDR by written notice to Purchaser, if
the conditions set forth in Article VII shall not have been complied with or
performed on or prior to the Closing Date in any material respect and neither
any Selling Person nor the Company shall have materially breached any of their
representations, warranties, covenants or agreements contained herein, and, in
the case of both clauses (c) and (d),
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such noncompliance or nonperformance shall not have been cured or eliminated (or
by its nature cannot be cured or eliminated) on or before October 30, 1996.
Section 10.2 Effect of Termination. In the event that this Agreement
---------------------
shall be terminated pursuant to Section 10.1, all further obligations of the
parties hereto under this Agreement (other than pursuant to Sections 5.6(b),
11.1 and 11.6 and as provided in the third sentence of Section 5.2(a), which
shall continue in full force and effect) shall terminate without further
liability or obligation of either party to the other party hereunder; provided,
--------
however, that no party shall be released from liability hereunder if this
Agreement is terminated and the transactions abandoned by reason of (i) willful
failure of such party to have performed its obligations hereunder or (ii) any
knowing misrepresentation made by such party of any matter set forth herein.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1 Expenses. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel, financial
advisors and accountants; provided, however, that Purchaser and CDR each shall
--------
pay all of its respective filing fees under the HSR Act and any other applicable
antitrust or competition laws or statutes. The Selling Group shall be
responsible for paying and shall indemnify Purchaser, the Company and the
Subsidiaries against any and all out-of-pocket costs and expenses of third
parties (including the fees and disbursements of White and Case and other legal
counsel) incurred by the Company or any Subsidiary in connection with the Sale.
Section 11.2 Transfer Taxes. All stamp, transfer, documentary, sales,
--------------
use, registration and other such taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
contemplated hereby (collectively, the "TRANSFER TAXES") shall be paid 50% by
Purchaser and 50% by the Selling Group and Seller shall, at the 50/50 expense of
the Purchaser and the Selling Group, procure any stock transfer stamps required
by, and properly file on a timely basis all necessary tax returns and other
documentation with respect to, any Transfer Tax and provide to Purchaser
evidence of payment of all Transfer Taxes.
Section 11.3 Governing Law; Consent to Jurisdiction. (a) The
--------------------------------------
interpretation and construction of this Agreement, and all matters relating
hereto, shall
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be governed by the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
(b) Each of the parties agrees that any legal action or proceeding
with respect to this Agreement may be brought in the Courts of the State of New
York or the United States District Court for the Southern District of New York
and, by execution and delivery of this Agreement, each party hereto hereby
irrevocably submits itself in respect of its property, generally and
unconditionally to the non-exclusive jurisdiction of the aforesaid courts in any
legal action or proceeding arising out of this Agreement. Each of the parties
hereto hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in the courts
referred to in the preceding sentence. Each party hereto hereby consents to
process being served in any such action or proceeding by the mailing of a copy
thereof to the address set forth opposite its name below and agrees that such
service upon receipt shall constitute good and sufficient service of process or
notice thereof. Nothing in this paragraph shall affect or eliminate any right to
serve process in any other matter permitted by law.
(c) CDR hereby (x) consents to the commencement of any suit or
proceeding against it under this Agreement, (y) to the fullest extent permitted
by law waives any right, if any, it has to assert governmental or sovereign
immunity from suit or liability hereunder, and (z) agrees that it will not
dissolve or liquidate so long as it has any indemnification obligations
remaining under this Agreement except to the extent it has first had such
indemnification obligations assumed (to the reasonable satisfaction of
Purchaser) by a creditworthy entity reasonably satisfactory to Purchaser.
Section 11.4 Captions. The Article and Section captions used herein
--------
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 11.5 Publicity. Except as otherwise required by law or
---------
regulation as advised by counsel in writing, neither of the parties hereto shall
issue any press release or make any other public statement, in each case
relating to or connected with or arising out of the Sale, this Agreement or the
matters contained herein, without obtaining prior approval of the other party
to the contents and the manner of presentation and publication thereof.
Section 11.6 Business Records. After the Closing Date, Purchaser shall
----------------
afford the Selling Group and their attorneys, accountants, officers and other
representatives reasonable access, during normal business hours, to the books
and
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records of the Company and the Subsidiaries to the extent they relate to a
period prior to the Closing Date (and shall permit such Persons to examine and
copy such books and records to the extent reasonably requested by such party)
and shall cause the directors, officers and employees of the Company and the
Subsidiaries to furnish all information requested by the Selling Group in
connection with financial reporting and tax matters (including financial and tax
audits and tax contests), third party litigation and other similar business
purposes. Purchaser shall cause the Company and the Subsidiaries to maintain all
such books and records in the country in which such books and records were
located prior to the Closing Date if required by applicable law and shall not
destroy or dispose of any such books and records without the prior written
consent of CDR; provided, however, that Purchaser shall be entitled to destroy
--------
any of such books and records after the seventh anniversary of the Closing Date
with the prior written consent of CDR; provided further, however, that if the
-------- -------
CDR does not consent to the destruction of such books and records, Purchaser may
deliver them to the CDR. After the Closing Date, the Selling Group shall afford
Purchaser and its attorneys, accountants, officers and other representatives
reasonable access, during normal business hours, to the books and records of the
Selling Group to the extent they relate to the operations of the Company or the
Subsidiaries prior to the Closing Date (and shall permit such Persons to examine
and copy such books and records to the extent reasonably requested by such
party); provided, however, that Purchaser and its representatives shall only be
--------
entitled to review the tax returns of the any Selling Person that relate to the
Company or the Subsidiaries. Each party shall promptly reimburse any other
party's reasonable costs and expenses in providing such party and its attorneys,
accountants, officers and other representatives access to the other party's
books and records under this Section 11.6.
Section 11.7 Memorandum; Disclaimer of Projections. Neither any
-------------------------------------
Selling Person nor the Company makes any representation or warranty to Purchaser
except as specifically made in this Agreement. In particular, the Selling Group
and the Company make no representation or warranty to Purchaser with respect to
(a) the information set forth in the Confidential Memorandum distributed by
Lazard Freres in connection with the Sale or (b) any financial projection or
forecast relating to the Company. With respect to any such projection or
forecast delivered by or on behalf of the Selling Group or the Company to
Purchaser, Purchaser acknowledges that (i) there are uncertainties inherent in
attempting to make such projections and forecasts, (ii) it is familiar with such
uncertainties, (iii) it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all such projections and forecasts so
furnished to it and (iv) it shall have no claim against any Selling Person,
the Company or Lazzard Freres with respect thereto.
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Section 11.8 Notices. Any notice or other communications required or
-------
permitted hereunder shall be sufficiently given if delivered in person or sent
by telecopy or by registered or certified mail, postage prepaid, addressed as
follows:
if to Purchaser, to it at:
P & F Acquisition Corp.
c/o Gibson, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
F. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and if any of the Selling Group, to them at:
Consortium de Realisation
c/o White & Case
1155 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to the Company at:
Metro-▇▇▇▇▇▇▇-▇▇▇▇▇ Inc.
2SOO ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given as of
the date so delivered, sent by telecopy or mailed.
Section 11.9 Parties in Interest. This Agreement may not be
-------------------
transferred, assigned, pledged or hypothecated by any party hereto, other than
by operation of law. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
Section 11.10 Counterparts. This Agreement may be executed in two or
------------
more counterparts, all of which taken together shall constitute one instrument.
Section 11.11 Entire Agreement. This Agreement, including the
----------------
Schedules and other documents referred to herein which form a part hereof, and
the
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Confidentiality Agreement, contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter other than the Confidentiality Agreement.
Section 11.12 Amendments. This Agreement may not be changed orally,
----------
but only by an agreement in writing signed by the parties hereto. Any provision
of this Agreement can be waived, amended, supplemented or modified by written
agreement of the parties hereto.
Section 11.13 Third Party Beneficiaries. Each party hereto intends
-------------------------
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any Person other than the parties hereto; provided, however,
--------
that notwithstanding this Section 11.13, the provisions of Section 5.4, 5.5, 5.7
and 5.8 of this Agreement, to the extent applicable, shall inure to the benefit
of officers and directors of the Company and each of the Subsidiaries and the
employees of the Company and each of its Subsidiaries and may be enforced by
such officers, directors and employees and their respective heirs and
personal representatives.
Section 11.14 Selling Group. All amounts required to be paid by the
-------------
Selling Group hereunder shall be owed by each of the Selling Group on a joint
and several basis.
Section ll.15 Liquidation of Parent. If Purchaser gives notice as
---------------------
provided in Section 8.4 that it desires to make one or more Section 338
Elections, CDR shall have the right, notwithstanding any other provision of this
Agreement, to cause Parent to be liquidated under the provisions of Delaware Law
prior to the Closing and if such liquidation is effected all references herein
to Parent with respect to any event, circumstance, occurrence or otherwise
occurring on or after such liquidation shall be deemed to be and shall become
references to Seller.
Section 11.16 Names. Promptly following the Closing, Seller and Parent
-----
(if it still exists) shall change their respective names to delete therefrom all
references to "MGM" and on and after Closing the Selling Group shall no longer
have any right to, and shall not, use any reference to MGM and/or Metro-▇▇▇▇▇▇▇-
▇▇▇▇▇ in any of their names.
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IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of the
day and year first above written.
P & F ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
CONSORTIUM DE REALISATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Directeur General
MGM HOLDINGS CORPORATION
By: /s/ ▇▇▇▇-▇▇▇▇▇▇ Joannet
-----------------------------
Name: ▇▇▇▇-▇▇▇▇▇▇ Joannet
Title: President and Treasurer
MGM GROUP HOLDINGS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. Hope
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. Hope
Title: Executive Vice President
METRO-▇▇▇▇▇▇▇-▇▇▇▇▇ INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. Hope
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. Hope
Title: Executive Vice President
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