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EXHIBIT 99.1
LETTER OF INTENT
This Letter of Intent is entered into as of April 27, 1997 by and among
METROMEDIA INTERNATIONAL GROUP, INC., a Delaware corporation ("Seller"), ORION
PICTURES CORPORATION, a Delaware corporation ("Orion" and, together with all of
its direct and indirect subsidiaries other than the Landmark Theater Group and
each of its subsidiaries, the "Entertainment Companies"), and P&F ACQUISITION
CORP., a Delaware corporation ("Buyer").
Seller, the Entertainment Companies and Buyer hereby express their
intention to enter into a definitive agreement (the "Definitive Agreement")
substantially in the form of the Stock Purchase Agreement attached hereto dated
as of May __, 1997 among the parties hereto (the "Stock Purchase Agreement"), as
the same may be modified by good faith negotiation, pursuant to which Buyer will
acquire the businesses of the Entertainment Companies through a purchase of all
of the capital stock of Orion (the "Transaction"). The obligation of the parties
to enter into the Definitive Agreement shall be subject to approval of the
respective boards of directors of the Buyer and the Seller and subject in the
case of Seller to delivery by Buyer of the Bank Commitment Letter (as defined
below) and Equity Commitment Letter (as defined below) or other similar
satisfactory substantiation by Buyer. Based upon the foregoing, Buyer will
continue its due diligence investigation of the Entertainment Companies and
Seller will continue its efforts with respect to the fairness of the
Transaction. Capitalized terms used but not defined herein shall have the
meaning provided in the Stock Purchase Agreement.
Upon execution of a counterpart of this Letter of Intent, the following
lettered sections will constitute legally binding and enforceable agreements of
Buyer and Seller, in recognition of the significant costs to be borne by Buyer
and Seller in pursuing the Transaction and further in consideration of their
mutual undertakings as to the matters described herein.
(a) ACCESS. Seller will permit Buyer's employees, auditors,
legal counsel, potential financing sources and other authorized
representatives access to the officers, employees, agents, advisors,
properties, records and documents of the Seller and all of its
affiliates relating to the Entertainment Companies. Buyer will conduct
this inspection, investigation and audit in a reasonable manner and, to
the extent practicable, during regular business hours.
(b) BEST EFFORTS. Buyer and Seller will use their best
efforts to submit the Definitive Agreement for approval by the
respective boards of directors of Seller and Buyer by the close of
business New York time on May 2, 1997. If the Definitive Agreement is
approved by the boards of directors of both Buyer and Seller, the
Definitive Agreement shall be dated the date of the last such approval
and executed and delivered on that day. The boards of directors of
Seller and Buyer shall have complete discretion to approve or withhold
approval of the Definitive Agreement.
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(c) EXCLUSIVE DEALING; TERMINATION. Until the earlier of (x)
the date of the Definitive Agreement (if the Definitive Agreement is
executed by the parties hereto and approved by their respective boards
of directors) or (y) the close of business New York time May 2, 1997,
the parties agree to be bound by the terms of Section 5.08 of the Stock
Purchase Agreement, which Section is deemed incorporated herein by this
reference. if the Definitive Agreement is not executed by the parties
(following approval by the respective boards of directors) by the close
of business New York time on May 2, 1997, any party may terminate this
Letter of Intent immediately upon providing written notice to the other
parties at the addresses specified in the Stock Purchase Agreement;
provided, however, the provisions of Section (d) below shall survive any
such termination.
(d) COMMITMENT FEE; EXPENSES.
(i) To compensate Buyer for entering into this
Letter of Intent and taking action to consummate the Transaction and
incurring the costs and expenses related thereto and other losses and
expenses, including the foregoing by Buyer of other opportunities,
Seller agrees to pay to Buyer an aggregate amount equal to Five Million
Dollars ($5,000,000) less Buyer's Expenses (as defined below) (the
"Commitment Fee") if (w) Buyer's board of directors has authorized
execution by Buyer of the Definitive Agreement, subject to execution of
same by Seller, (x) Buyer has provided to Seller on or before the close
of business New York time May 2, 1997 a Bank Commitment Letter and an
Equity Commitment Letter providing for debt and equity financing for the
Transaction in an aggregate amount of at least Five Hundred Sixty
Million Dollars ($560,000,000), (y) either Seller's board of directors
does not authorize, on or before May 2, 1997, Seller to execute the
Definitive Agreement or Seller once so authorized does not execute the
Definitive Agreement on or before the close of business New York time on
May 2, 1997 AND (z) on or before the close of business New York time on
May 2, 1997 either (A) an ALTERNATIVE PROPOSAL shall become publicly
announced or shall have been publicly known (excluding any such
Alternative Proposal that has been publicly announced on or before the
date hereof), or (B) an Alternative Proposal shall have been
communicated to Seller or any of Seller's Affiliates or the
Entertainment Companies, or any representative of any of the foregoing
(including any such Alternative Proposal that has been so communicated
on or before the date hereof), and on or before the close of business
New York time on May 1, 1998 Seller or any of the Seller Affiliated
Group or the Entertainment Companies either enters into an agreement
(the "Alternative Agreement") with any party directly or indirectly
connected with the Alternative Proposal to consummate an Alternative
Proposal or otherwise effectuates an Alternative Proposal with any such
party (the "Alternative Transaction"). If any of the foregoing events
occur, Seller shall also pay Buyer's Expenses. "Bank Commitment Letter"
shall mean a commitment letter from ▇▇▇▇▇▇ Guaranty Trust Company of New
York, or another lender selected by Buyer, in form and substance
satisfactory to Buyer, which shall provide the New Orion Credit
Facility, subject to customary conditions precedent to such lender's
obligation to make such financing
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available. "Equity Commitment Letter" shall mean a commitment letter or
letters from one or more of Buyer's existing stockholders in form and
substance satisfactory to Buyer (and not containing any material
conditions other than those specified in the Stock Purchase Agreement
and consummation of the financing contemplated by the Bank Commitment
Letter), by which such stockholder(s) agree to contribute cash to the
capital of Buyer, or purchase for cash additional capital stock of
Buyer.
(ii) The Commitment Fee and Buyer's Expenses shall be
payable by Seller to Buyer on or before May 5, 1997 if the event
described in Section(d)(i)(z)(A) occurs or on the next business day
following the execution of the Alternative Agreement or effectuation of
the Alternative Transaction if either event described in
Section(d)(i)(z)(B) occurs. "Buyer's Expenses" shall mean the actual
out-of-pocket expenses incurred by Buyer and any Affiliate in connection
with or arising out of this Letter of Intent and efforts to consummate
the Transaction (including, without limitation, amounts paid or payable
to investment bankers, fees and expenses of counsel, accountants and
consultants, and printing expenses), regardless of when those expenses
are incurred, not to exceed Five Million Dollars ($5,000,000) in the
aggregate for purposes of this Letter of Intent.
(iii) Seller acknowledges that the agreements
contained in this Section(d) are an integral part of the Transaction
contemplated by this Letter of Intent, and that, without these
agreements, Buyer would not enter into this Letter of Intent.
Accordingly, if Seller fails to pay any amounts owing pursuant to this
Section(d) when due, Seller shall in addition thereto pay to Buyer all
costs and expenses (including attorneys' fees and costs) incurred in
collecting such amounts, together with interest on such amounts (or any
unpaid portion thereof) from the date such payment was required to be
made until the date such payment is received by Buyer at one percent in
excess of the Reference Rate as in effect from time to time during such
period; provided, however, that in no event shall such interest rate
exceed the maximum rate permitted by Applicable Law (as defined in the
Stock Purchase Agreement).
Other than set forth in Sections (a)-(d) above, this Letter of Intent
does not, and is not intended to, constitute a legally binding obligation on the
part of any of the parties hereto. It does, however, constitute a statement of
the intention of the parties to proceed promptly in good faith with respect to
the Transaction, and it shall be governed by, and construed and enforced in
accordance with, the internal laws of New York applicable to contracts made and
to be performed therein.
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IN WITNESS WHEREOF, the parties hereto have caused this Letter of
Intent to be duly executed by their respective authorized officers as of the
day and year first above written.
METROMEDIA INTERNATIONAL
GROUP, INC.
/s/ [SIG]
------------------------------------
By: [ILLEGIBLE]
Its: Executive Vice President
ORION PICTURES CORPORATION
/s/ [SIG]
------------------------------------
By: [ILLEGIBLE]
Its: Senior Executive Vice President
P&F ACQUISITION CORP.
/s/ [SIG]
------------------------------------
By:
Its:
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EXHIBIT TO
THE LETTER OF INTENT
STOCK PURCHASE AGREEMENT
AMONG
METROMEDIA INTERNATIONAL GROUP, INC.,
ORION PICTURES CORPORATION
AND
P&F ACQUISITION CORP.
DATED AS OF MAY __, 1997
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TABLE OF CONTENTS
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Page
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ARTICLE I. DEFINITIONS...........................................................................................1
1.01. Definitions.............................................................................................1
1.02. Index of Other Defined Terms............................................................................9
ARTICLE II. TRANSFER OF ASSETS..................................................................................11
2.01. Sale of Stock..........................................................................................11
2.02. Closing ...............................................................................................11
2.03. Purchase Price.........................................................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER...........................................................12
3.01. Ownership of Stock.....................................................................................13
3.02. Corporate Existence and Power..........................................................................13
3.03. Corporate Authorization of Seller......................................................................13
3.04. Subsidiaries...........................................................................................13
3.05. Entertainment Group....................................................................................14
3.06. Corporate Authorization................................................................................14
3.07. Governmental Authorization.............................................................................14
3.08. Non-Contravention......................................................................................14
3.09. Financial Statements; Undisclosed Liabilities..........................................................15
3.10. Absence of Certain Changes.............................................................................15
3.11. Properties; Tangible Assets............................................................................17
3.12. Affiliates.............................................................................................17
3.13. Litigation.............................................................................................18
3.14. Contracts..............................................................................................18
3.15. Permits; Required Consents.............................................................................20
3.16. Compliance with Applicable Laws........................................................................20
3.17. Employment Agreements; Change in Control; and Employee Benefits........................................20
3.18. Labor and Employment Matters...........................................................................23
3.19. Intellectual Property..................................................................................24
3.20. Library Films..........................................................................................25
3.21. Films In Progress......................................................................................27
3.22. Development Projects...................................................................................30
3.23. Advisory Fees..........................................................................................30
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3.24. Environmental Compliance...............................................................................30
3.25. Insurance..............................................................................................31
3.26. Tax Matters............................................................................................31
3.27. SEC Documents..........................................................................................31
3.28. Disclosure.............................................................................................31
3.29. Financial Statements of Landmark.......................................................................32
3.30. No Contract With Landmark..............................................................................32
3.31. Board Recommendations..................................................................................32
3.32. Bankruptcy.............................................................................................33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................33
4.01. Corporate Existence and Power..........................................................................33
4.02. Corporate Authorization................................................................................33
4.03. Governmental Authorization.............................................................................33
4.04. Non-Contravention......................................................................................34
4.05. Advisory Fees..........................................................................................34
4.06. Litigation.............................................................................................34
4.07. Purchase for Investment................................................................................34
4.08 Ownership of MGM.......................................................................................34
ARTICLE V. COVENANTS OF SELLER AND ORION........................................................................34
5.01. Conduct of the Business................................................................................34
5.02. Access to Information..................................................................................38
5.03. Compliance with Terms of Required Governmental Approvals and Required Contractual Consents.............38
5.04. Maintenance of Insurance Policies......................................................................38
5.05. Confidentiality........................................................................................39
5.06. Specific Performance...................................................................................40
5.07 Bankruptcy Cases.......................................................................................40
5.08. No Solicitations.......................................................................................40
5.09. Transfer of Assets.....................................................................................41
5.10. Use of Trade Names.....................................................................................41
ARTICLE VI. COVENANTS OF BUYER..................................................................................42
6.01. Compliance with Terms of Required Governmental Approvals and Required Contractual Consents.............42
6.02. Confidentiality........................................................................................42
6.03. Specific Performance...................................................................................42
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6.04. Use of Metromedia Name.................................................................................43
6.05 Bank Waivers...........................................................................................43
ARTICLE VII. COVENANTS OF ALL PARTIES...........................................................................43
7.01. Further Assurances.....................................................................................43
7.02. Certain Filings........................................................................................43
7.03. Public Announcements...................................................................................43
7.04. Administration of Accounts.............................................................................43
7.05. Specific Performance...................................................................................44
7.06. Right of First Negotiation.............................................................................44
7.07. Proxy Consent Solicitation.............................................................................44
7.08. Refinancing of Debt....................................................................................45
ARTICLE VIII. CONDITIONS TO CLOSING.............................................................................46
8.01. Conditions to Obligation of Buyer......................................................................46
8.02. Conditions to Obligation of Seller.....................................................................47
ARTICLE IX. INDEMNIFICATION.....................................................................................49
9.01. Indemnification of Buyer...............................................................................49
9.02. Indemnification of Seller..............................................................................49
9.03. Survival of Representations, Warranties and Covenants..................................................49
9.04. Claims for Indemnification.............................................................................50
9.05. Defense of Claims......................................................................................51
9.06. Nature of Payments.....................................................................................52
9.07. Taxes..................................................................................................52
ARTICLE X. TERMINATION..........................................................................................52
10.01. Grounds for Termination................................................................................52
10.02. Effect of Termination..................................................................................54
10.03 Commitment Fee.........................................................................................54
ARTICLE XI. TAX MATTERS.........................................................................................56
11.01. Tax Returns and Payments...............................................................................56
11.02 Section 338(h)(10).....................................................................................58
11.03. Indemnification........................................................................................59
11.04. Procedures for Indemnification.........................................................................59
ARTICLE XII. MISCELLANEOUS......................................................................................60
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12.01. Notices...............................................................................................60
12.02. Amendments; No Waivers................................................................................62
12.03. Construction..........................................................................................62
12.04. Expenses..............................................................................................62
12.05. Successors and Assigns................................................................................62
12.06. Governing Law.........................................................................................63
12.07. Counterparts; Effectiveness...........................................................................63
12.08. Entire Agreement......................................................................................63
12.09. Captions..............................................................................................63
12.10. Severability..........................................................................................63
12.11. Forum; Attorneys' Fees................................................................................64
12.12. Cumulative Remedies...................................................................................64
12.13. Third Party Beneficiaries.............................................................................64
12.14. Knowledge.............................................................................................64
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SCHEDULES
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Schedule 1.01 Permitted Liens
Schedule 1.02 Statement of Assumptions
Schedule 3.04 Subsidiaries
Schedule 3.08(c) Conflicts
Schedule 3.09 Financial Statements; Undisclosed Liability
Schedule 3.10(h) Distributions
Schedule 3.10(e) Absence of Certain Changes
Schedule 3.11(a) Liens
Schedule 3.11(c) Leases
Schedule 3.11(d) Real Property Owned
Schedule 3.12 Affiliates
Schedule 3.13 Litigation
Schedule 3.14(a) Scheduled Contracts
Schedule 3.14(b) Valid and Binding Contracts
Schedule 3.14(c) Participations
Schedule 3.15(a) Permits
Schedule 3.15(b) Required Consents
Schedule 3.16 Compliance with Applicable Laws
Schedule 3.17(a) Certain Employment Agreements
Schedule 3.17(b) Other Employment Agreements
Schedule 3.17(c) Benefit Plans
Schedule 3.17(d) Employee Pension Benefit Plans
Schedule 3.17(e) Multiemployer Plans
Schedule 3.17(f) Entertainment Plans
Schedule 3.18(a) Labor and Employment Matters
Schedule 3.18(b) Labor Disputes
Schedule 3.19(a) Owned Intellectual Property Rights
Schedule 3.19(b) Licensed Intellectual Property Rights
Schedule 3.19(c) Licenses
Schedule 3.19(d) Claims
Schedule 3.19(e) Royalties
Schedule 3.20(a) Library Films
Schedule 3.20(a)(i) Availability Dates
Schedule 3.20(a)(ii) Film Rights
Schedule 3.20(a)(iii) Dormant Films
Schedule 3.20(a)(iv) Film Liens
Schedule 3.20(b) Ratings
Schedule 3.20(c) Elements
Schedule 3.20(f) Copyrights
Schedule 3.20(g) Music
Schedule 3.20(i) Insurance Claims
Schedule 3.20(j) Rights
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Schedule 3.20(l) Participations
Schedule 3.21(a) Films In Progress
Schedule 3.21(b) Ownership
Schedule 3.21(c) Ratings
Schedule 3.21(d) Elements
Schedule 3.21(i) Copyrights
Schedule 3.21(j) Music
Schedule 3.21(l) Insurance Claims
Schedule 3.21(m) Rights
Schedule 3.21(o) Participations
Schedule 3.22 Development Projects
Schedule 3.24(a) Environmental Permits
Schedule 3.24(b) Compliance with Environmental Laws
Schedule 3.24(c) Continuing Compliance with Environmental Laws
Schedule 3.25 Insurance
Schedule 3.26 Tax Matters
Schedule 3.29(a) Landmark Financial Statements
Schedule 3.29(b) Landmark Transferred Assets
Schedule 3.30 No Contracts with Landmark
Schedule 3.32(c) Plan Liens
Schedule 4.07 Buyer Liabilities
Schedule 4.09 Buyer Disclosure
Schedule 5.01(a)(ix) Budgets
Schedule 5.07 Debt
Schedule 7.06 Right of First Negotiation
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") dated as of
May __, 1997 is by and among METROMEDIA INTERNATIONAL GROUP, INC., a Delaware
corporation ("Seller"), ORION PICTURES CORPORATION, a Delaware corporation
("Orion" and, together with all of its direct and indirect subsidiaries other
than the Landmark Theater Group and its subsidiaries ("Landmark"), the
"Entertainment Companies"), and P&F ACQUISITION CORP., a Delaware corporation
("Buyer").
R E C I T A L S
A. The Entertainment Companies are engaged in the
business of the production and worldwide distribution and exploitation in all
media of motion pictures, television programming and other filmed entertainment,
including the exploitation of a library of motion pictures, television
programming and other filmed entertainment;
B. Seller owns all of the issued and outstanding stock
of Orion (the "Shares"); and
C. Seller desires to sell and Buyer desires to purchase
all of the Shares on the terms and conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the
mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person.
"Alternative Proposal" shall mean a proposal or offer (other
than by Buyer) for a stock purchase, asset acquisition, merger, consolidation or
other business combination involving any Entertainment Company or any proposal
to acquire in any manner a direct or indirect substantial equity interest in, or
all or any substantial part of the assets of, any Entertainment Company, but
shall not include a proposal or offer to acquire an equity interest in Seller by
a Person that agrees for the benefit of Buyer to cause Seller to comply with the
terms of this Agreement and to vote all shares of Seller's common stock or other
equity securities beneficially owned by such Person in favor of approval of this
Agreement and the transactions contemplated hereby.
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"Applicable Law" means, with respect to any Person, any
domestic or foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement of any Governmental Authority (including
any Environmental Law) applicable to such Person or any of its Affiliates or
Plan Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer's,
director's, employee's, consultant's or agent's activities on behalf of such
Person or any of its Affiliates or Plan Affiliates).
"Associate" or "Associated With" means, when used to indicate
a relationship with any Person, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities issued by such other
Person, (b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, and (c) any relative or spouse of such Person, or any
relative of such spouse who has the same home as such Person or who is a
director or officer of such Person or any Affiliate thereof.
"Bankruptcy Cases" means the bankruptcy cases of In re Orion
Pictures, Inc., a Delaware Corporation, et. al., Debtors, jointly administered
under case number 91 B 15635 (BRL) commenced in the Bankruptcy Court under title
11 of the United States Bankruptcy Code.
"Bankruptcy Court" means the United States Bankruptcy Court
for the Southern District of New York acting in any of the Bankruptcy Cases.
"Benefit Arrangement" means any material benefit arrangement
that is not an Employee Benefit Plan, including, without limitation, (i) each
employment or consulting agreement, (ii) each arrangement providing for
insurance coverage or workers' compensation benefits, (iii) each incentive bonus
or deferred bonus arrangement, (iv) each arrangement providing termination
allowance, severance or similar benefits, (v) each equity compensation plan,
(vi) each deferred compensation plan and (vii) each compensation policy and
practice maintained by Seller or any Entertainment Company or any ERISA
Affiliate of any of the foregoing covering the employees, former employees,
directors and former directors thereof and the beneficiaries of any of them.
"Benefit Plan" means an Employee Benefit Plan or Benefit
Arrangement.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
"Buyer Affiliated Group" shall mean Buyer and members of the
affiliated group, within the meaning of Section 1504 of the Code, of which Buyer
is the common parent.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confirmation Documents" means the Plan of Reorganization and
the Order Confirming Plan, and any other orders of the Bankruptcy Court entered
in the Bankruptcy Cases, which modifies the treatment of the claims of creditors
or of equity security holders or that limits the power or authority of any
Entertainment Company to use, sell or lease its property as
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authorized by applicable non-bankruptcy law, or that requires any Entertainment
Company to give notice to or obtain the approval of the Bankruptcy Court in
connection with the conduct of its business and affairs.
"Contracts" means all contracts, agreements, options, leases,
License Agreements, output agreements, distribution contracts, sales and
purchase orders, commitments, instruments and other obligations of any kind,
whether written or oral, inclusive of amendments, to which any Entertainment
Company is a party on the Closing Date, including the Scheduled Contracts and
the Subsequent Material Contracts.
"Consolidated Returns" shall mean federal Income Tax Returns
that Seller has elected to file on a consolidated basis.
"Damages" means all demands, claims, actions or causes of
action, assessments, losses, damages, costs, expenses, liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement net
of insurance proceeds actually received, including without limitation (i)
interest on cash disbursements in respect of any of the foregoing at the
Reference Rate in effect from time to time, compounded quarterly, from the date
each such cash disbursement is made until the Person incurring the same shall
have been indemnified in respect thereof and (ii) reasonable costs, fees and
expenses of attorneys, accountants and other agents of such Person.
"Debt" means any indebtedness of any Entertainment Company,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or other similar instruments or letters of credit (or
reimbursement obligations in respect thereof) or banker's acceptances or
representing capitalized lease obligations or the balance deferred and unpaid of
the purchase price of any property, except any such balance that constitutes an
accrued expense or account payable, in each case incurred in the ordinary course
of business, as well as all indebtedness of others secured by a Lien on any
asset of any Entertainment Company (whether or not such indebtedness is assumed
by an Entertainment Company) and, to the extent not otherwise included, any
Guaranty by any Entertainment Company of any indebtedness of any other Person
(other than another Entertainment Company).
"Elements" means negative and positive film, soundtracks,
music tracks, effects tracks, optical, audio, video and advertising materials
and supplies associated with any Film.
"Employee Benefit Plan" means any employee benefit plan, as
defined in Section 3(3) of ERISA, that is sponsored or contributed to by Seller
or any Entertainment Company or any ERISA Affiliate thereof covering employees
or former employees of any Entertainment Company.
"Employee Pension Benefit Plan" means any employee pension
benefit plan, as defined in Section 3(2) of ERISA, that is subject to Title IV
of ERISA, other than a Multiemployer Plan.
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"Environmental Laws" means all Applicable Laws relating to the
protection of the environment or human health including, without limitation, (i)
all requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land; (ii) all requirements
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, chemical substances,
pollutants, contaminants or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature; and (iii) the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the Clean Air Act, the Water Pollution Control
Act, the Safe Drinking Water Act, the Toxic Substances Control Act ("TSCA") and
all regulations promulgated pursuant to any of these or analogous state or local
statutes.
"Environmental Liabilities" means Liabilities of a Person that
arise under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of the Code.
"Existing Orion Credit Facility" means the Amended and
Restated Credit, Guaranty and Security Agreement, dated as of June 27, 1996, by
and among Orion, the lenders listed therein and The Chase Manhattan Bank, as
agent.
"Films" means motion pictures (including feature films),
shorts, television programming, animated programming or other filmed
entertainment, and the components thereof (whether or not now known or
recognized) as to which any Entertainment Company owns any right, title or
interest including, without limitation, Library Films, Films In Progress and
Development Projects and including, without limitation: (i) completed, delivered
and released projects; (ii) works in progress comprising projects in
development, principal photography and/or post-production, projects complete but
not yet released, and unreleased or completed but undelivered pick-ups; (iii)
underlying rights in and to the literary, musical and dramatic and other
material associated with or related to or necessary to the exploitation of the
works or projects referred to in clauses (i) or (ii) including, without
limitation, copyrights pertaining thereto; (iv) to the extent related to the
works or projects referred to in clauses (i) or (ii), sequel, prequel and remake
rights, all rights to novelization, merchandising, character, serialization,
games and interactive video; (v) all other ancillary and subsidiary rights
throughout the universe related to such works and projects; (vi) all Elements;
and (vii) all contractual and other rights associated with or related to such
works or projects and the related ancillary and subsidiary rights whether in any
media now known or hereafter developed.
"GAAP" means generally accepted accounting principles,
consistently applied.
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"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court (including, without limitation, the Bankruptcy
Court), government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any political
or other subdivision, department or branch of any of the foregoing.
"Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
"Guaranty" means, as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has made or issued a guaranty,
reimbursement, counterindemnity or similar obligation, in any case guaranteeing
or in effect guaranteeing any Debt, lease, dividend or other obligation (the
"primary obligation") of any other Person (the "primary obligor"), in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the payment thereof including, without limitation, any negative
pick-up obligation, or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided, however,
that the term Guaranty shall not include (A) endorsements of instruments for
deposit or collection in the ordinary course of business, (B) commitments to
produce Films, (C) minimum guaranteed payments in License Agreements with
respect to Films, or (D) obligations in respect of Participations payable to
others, which Participations were created in connection with the development,
production, acquisition, distribution, exhibition, exploitation or financing of
Films. The amount of any obligation in respect of a Guaranty shall be deemed to
be the lower of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty is made and (b) the maximum
amount for which such guaranteeing person may be liable pursuant to the terms of
the instrument embodying such Guaranty, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guaranty shall be such
guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by Buyer in good faith.
"Hazardous Substance" means any substance, waste or material:
(i) the presence of which requires investigation or remediation under any
Environmental Law; or (ii) the generation, storage, treatment, transportation,
disposal, remediation, removal, handling or management of which is regulated by
any Environmental Law; or (iii) that is defined as a "hazardous waste" or
"hazardous substance" under any Environmental Law; or (iv) that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise hazardous and is regulated by any Governmental Authority;
or (v) the presence of which poses a hazard to the health or safety of Persons;
or (vi) the presence of which constitutes a nuisance, trespass or other tortious
condition for which a Seller could be or is alleged to be liable; or
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(vii) without limitation, that contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Income Tax" shall mean all Taxes based upon, measured by or
calculated with respect to net income or profits, including any interest,
penalty or addition thereto.
"Indemnifying Party" means: (i) with respect to any Buyer
Indemnitee asserting a claim under Sections 9.01 or 12.12, Seller; and (ii) with
respect to any Seller Indemnitee asserting a claim under Sections 9.02 or 12.12,
Buyer.
"Indemnitee" means: (i) each of Buyer and its Affiliates with
respect to any claim for which Seller is an Indemnifying Party under Sections
9.01 or 12.12; and (ii) Seller and its Affiliates with respect to claims for
which Buyer is an Indemnifying Party under Sections 9.02 or 12.12.
"IRS" means the Internal Revenue Service.
"Liability" means, with respect to any Person, any liability
or obligation of such Person of any kind, character or description, whether
known or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person.
"License Agreements" means agreements to which any
Entertainment Company is a party or by which any Entertainment Company is
otherwise bound, pursuant to which an Entertainment Company grants or licenses
to or acquires from a third party any right, title or interest relating to the
distribution, exhibition or other exploitation of one or more Films.
"Lien" means, with respect to any asset, any mortgage, title
defect or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"LIBOR" shall mean, with respect to each day during any
applicable one month period, the one month London interbank offered rate for
Dollar deposits as of 11:00 a.m. (London time) on the day which is two Business
Days prior to the first day of such period, as quoted on Telerate page 3750 or
on such replacement system as is then customarily used to quote the London
interbank offered rate. If two or more such rates appear on Telerate page 3750
or associated pages, the rate in respect of such period shall be the arithmetic
mean of such offered rates (rounded upwards, if necessary, to the nearest
1/100th of one percent).
"Material Adverse Effect" means a material change in, or
material adverse effect on, the assets, liabilities, business, operations or
financial condition of the Entertainment Companies taken as a whole.
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"MGM Credit Facility" means the $800 Million Credit Agreement,
dated as of October 10, 1996, among Metro-▇▇▇▇▇▇▇-▇▇▇▇▇ Inc., the Lenders listed
therein, the L/C issuers named therein and ▇▇▇▇▇▇ Guaranty Trust Company of New
York, as agent, and all related documents.
"Multiemployer Plan" means a multiemployer plan, as defined
in Section 3(37) and 4001(a)(3) of ERISA.
"New Orion Credit Facility" means a revolving credit facility,
naming Orion as borrower, that is to take effect concurrent with the Closing and
that in all respects is in form and substance satisfactory to Buyer.
"Order Confirming Plan" means the order of the Bankruptcy
Court entitled "Order Confirming the Debtors' Modified Third Amended Joint
Consolidated Plan of Reorganization," dated October 20, 1992, entered in the
Bankruptcy Cases.
"Participations" means, with respect to any Film, all amounts
(whether described as a deferment, a gross participation or otherwise) which any
Entertainment Company may be contractually obligated to pay to any person, for
rights or services in connection with any Film and which are based on or
dependent on all or any percentage of the proceeds of the Film (irrespective of
the manner in which such proceeds are defined or computed), including royalties,
residuals and guild payments, whether or not such payment has then become due or
been made.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments; charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith; (iii) Liens relating to
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
(iv) Liens securing executory obligations under any Lease that constitutes an
"operating lease" under GAAP; (v) guild Liens; (vi) customary Liens (a) granted
in the ordinary course to secure a licensee's ability to retain distribution
rights under a License Agreement to which the licensee is a party and (b) which
Liens, if enforced, in the aggregate would not have a Material Adverse Effect;
and (vii) other Liens set forth on Schedule 1.01 hereto. Notwithstanding the
foregoing, no Lien arising under the Code or ERISA with respect to the
operation, termination, restoration or funding of any Benefit Plan sponsored by,
maintained by or contributed to by Seller or any Entertainment Company or by any
of their ERISA Affiliates or arising in connection with any material excise tax
or penalty tax with respect to such Benefit Plan shall be a Permitted Lien.
"Person" means an individual, corporation, partnership,
association, trust, estate or other entity or organization, including a
Governmental Authority.
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"Plan Affiliate" means, with respect to any Person, any
employee benefit plan or arrangement sponsored by, maintained by or contributed
to by such Person, and with respect to any employee benefit plan or arrangement,
any Person sponsoring, maintaining or contributing to such plan or arrangement.
"Plan of Reorganization" means the "Debtors' Third Amended
Joint Consolidated Plan of Reorganization," dated September 3, 1992, filed in
the Bankruptcy Cases.
"Post-Closing Period" shall mean any Taxable period that
begins after the Closing Date.
"Pre-Closing Period" shall mean any Taxable period that ends
on or before the Closing Date.
"Proceeding" means an action, suit, hearing, arbitration,
proceeding (public or private) or, to Seller's knowledge, governmental
investigation, that has been brought by or against any Governmental Authority or
any other Person.
"Prohibited Transaction" means a transaction that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA, respectively.
"Reference Rate" means LIBOR as in effect from time to time
plus 1.00%. The party to whom interest is payable hereunder shall determine
LIBOR for successive one month periods until the obligation bearing interest is
paid in full.
"Seller Affiliated Group" shall mean Seller and members of the
affiliated group, within the meaning of Section 1504 of the Code, of which
Seller is the common parent.
"Share Encumbrances" means, with respect to any of the Shares,
any lien, charge, claim, option, pledge, right of other parties, voting trust,
proxy, stockholder or similar agreement, restriction, adverse claim or any other
encumbrance of any nature whatsoever.
"Statement of Assumptions" means the statement of assumptions
derived by Buyer from information made available to it in its due diligence
investigation of the Entertainment Companies prior to the date of this Agreement
that is attached as Schedule 1.02 hereto.
"Straddle Period" shall mean any Taxable period that begins
before and ends after the Closing Date.
"Subsidiary" means, with respect to any Person, (i) any
corporation as to which more than 10% of the outstanding stock having ordinary
voting rights or power (and excluding stock having voting rights only upon the
occurrence of a contingency unless and until such contingency occurs and such
rights may be exercised) is owned or controlled, directly or indirectly, by such
Person and/or by one or more of such Person's Subsidiaries, and (ii) any
partnership, joint venture or other similar relationship between such Person (or
any Subsidiary
8
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thereof) and any other Person (whether pursuant to a written agreement or
otherwise), if such Person has a 10% or more equity interest therein.
"Tax" shall mean all federal, state, local and foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs, duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, irrespective of whether imposed directly or indirectly, as a
successor or transferee liability, as a joint and several liability pursuant to
Section 1.1502-6 of the Treasury Regulations or comparable or similar provisions
of state, local or foreign law, or whether by reason of any tax sharing, tax
reimbursement or tax indemnification agreement, or by reason of a tax treaty.
"Taxes" and "Taxable" shall have the correlative meanings.
"Tax Return" means all returns, reports, statements, forms or
other materials or information required to be filed with respect to any Tax.
"Union Bank Loan" means the loan in the amount of Seven
Million Dollars ($7,000,000) from Union Bank of California on the Film entitled
"Music From Another Room" which is secured solely by the assets of such Film and
which is otherwise without recourse against any Entertainment Company.
1.02. Index of Other Defined Terms. In addition to those
terms defined above, the following terms shall have the respective meanings
given thereto in the sections indicated below:
DEFINED TERM SECTION
"1996 Balance Sheet" 3.09
"A Films" 3.20(a)
"Annual Statements" 3.09
"ASCAP" 3.20(g)
"B Films" 3.20(a)
"BMI" 3.20(g)
"Buyer" Preamble
"Closing" 2.02
"Closing Date" 2.02
"Commitment Fee" 10.03
"Development Projects" 3.22
"Distributions" 3.10(h)
"Employment Agreements" 3.17(a)
"Entertainment Companies" Preamble
"Entertainment Plan" 3.17(c)
"Equity Securities" 3.01
"Essential Consents" 3.15(b)
"Film Rentals" 5.09
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"Films In Progress" 3.21(a)
"Final Statement" 2.03(c)
"Financial Statements" 3.09
"Insurance Policies" 3.25
"Intellectual Property Rights" 3.19(b)
"Interim Statements" 3.09(a)
"Landmark" Preamble
"Landmark Balance Sheet" 3.30
"Leases" 3.11(c)
"Library Films" 3.20(a)
"Licensed Intellectual Property Rights" 3.19(b)
"MPAA" 3.20(b)
"Orion" Preamble
"Outside Date" 10.01(f)
"Overpayment" 2.03(e)
"Owned Intellectual Property Rights" 3.19(c)
"P&A" 5.01(a)(ix)
"Permits" 3.15(a)
"Personal Property Leases" 3.11(c)
"Plan Liens" 3.33
"Preliminary Cash Statement" 2.03(b)
"Preliminary Statement" 2.03(b)
"Proceedings" 3.13
"Pro Forma Statements" 3.09
"Purchase Price" 2.03
"Real Property Leases" 3.11(c)
"Required Consents" 3.15(b)
"Required Contractual Consent" 3.15(b)
"Required Governmental Approval" 3.15(b)
"Scheduled Contracts" 3.14(a)
"SEC" 3.05
"SEC Documents" 3.27
"Section 338 Elections" 11.02(a)
"Section 338 Taxes" 11.02(c)
"Securities Act" 7.07(a)
"Selected Firm" 2.03(c)
"Seller" Preamble
"Seller Indemnitees" 9.02
"Shares" Preamble
"Subsequent Material Contract" 5.01(b)(v)
"Tax Claim" 11.03(a)
"Tax Indemnitee" 11.03(a)
"Tax Indemnitor" 11.03(a)
"Unaffiliated Production Company" 3.21(b)
"Unpaid Balance" 2.03(d)
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ARTICLE II
SALE OF STOCK
2.01. Sale of Stock. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees to purchase from Seller
and Seller agrees to sell to Buyer all of the Shares on the Closing Date. At the
Closing, Seller shall deliver to Buyer a certificate evidencing the Shares duly
endorsed for transfer and with all transfer stamps attached and such other
instruments as may be reasonably requested by Buyer to transfer full legal and
beneficial ownership of the Shares to Buyer, free and clear of all Share
Encumbrances.
2.02. Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ on the date on which the last of the conditions to Closing set forth in
Sections 8.01 and 8.02 have been satisfied or waived by the party or parties
entitled to waive the same or such other date as to which Buyer and Seller may
agree (the "Closing Date"). At the Closing, Buyer shall deliver to Seller the
Purchase Price.
2.03. Purchase Price.
(a) As consideration for the Shares and the
covenants and agreements of Seller set forth herein, Buyer shall deliver to
Seller at the Closing in immediately available funds to be delivered by wire
transfer (to a bank account designated at least three business days prior to the
Closing Date in writing by Seller) an amount (the "Purchase Price") equal to
Five Hundred Seventy Three Million Dollars ($573,000,000) less the sum of: (i)
the greater of (A) all Debt and other amounts outstanding under the Existing
Orion Credit Facility on December 31, 1996, net of cash on hand of the
Entertainment Companies on December 31, 1996, or (B) all Debt and other amounts
outstanding under the Existing Orion Credit Facility on the Closing Date, net of
cash on hand of the Entertainment Companies on the Closing Date; plus (ii)
unpaid interest on Debt under the Existing Orion Credit Facility accrued to, but
not including, the Closing Date; plus (iii) the greater of (A) Thirteen Million
Dollars ($13,000,000) or (B) all Debt of the Entertainment Companies (other than
Debt outstanding under the Existing Orion Credit Facility on the Closing Date)
outstanding on the Closing Date; plus (iv) unpaid interest on such Debt (other
than the Existing Orion Credit Facility) accrued to, but not including, the
Closing Date.
(b) Not later than three Business Days prior
to the Closing Date, Seller shall prepare and deliver to Buyer a statement (the
"Preliminary Statement") containing (i) a schedule of total Debt anticipated to
be outstanding on the Closing Date and an estimate of unpaid interest to be
accrued thereon as of the Closing Date and other amounts that then will be
payable with respect thereto, and (ii) an estimate of cash that would be
reflected on a consolidated balance sheet of Orion and its Subsidiaries prepared
as of the Closing Date (adjusted, if necessary, to give pro forma effect to
distribution to Seller of all capital stock of Landmark on the Closing Date). If
Buyer and Seller mutually agree upon the Closing Date Statement, the Purchase
Price shall be determined based thereon (the "Preliminary Cash Payment"), which
Preliminary Cash Statement shall be subject to adjustment as provided in
Sections 2.03(d) and (e).
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(c) Within thirty (30) days after the Closing
Date, Buyer shall prepare and deliver to Seller a statement (the "Final
Statement") containing (i) a schedule of total Debt outstanding on the Closing
Date and accrued and unpaid interest thereon, and other amounts payable with
respect thereto, as of the Closing Date (assuming that such Debt was repaid in
full on that date), and (ii) a calculation of cash on hand that would be
reflected on a consolidated balance sheet of Orion and its Subsidiaries prepared
as of the Closing Date (adjusted, if necessary, to give pro forma effect to
distribution to Seller of all capital stock of Landmark on the Closing Date).
The Final Statement shall be binding upon the parties to this Agreement unless
Seller gives written notice of disagreement therewith to Buyer within thirty
(30) days after its receipt of the Final Statement, specifying in reasonable
detail the nature and extent of such disagreement. If Buyer and Seller mutually
agree upon the Final Statement within thirty (30) days after Seller's receipt of
such notice from Buyer, such agreement shall be binding upon the parties to this
Agreement. If Buyer and Seller are unable to resolve any such disagreement
within such period, the disagreement shall be referred for final determination
to an independent accounting firm of national reputation selected by the mutual
agreement of Buyer and Seller (the "Selected Firm"), and the resolution of that
disagreement and the calculation of the total Debt and cash on hand resulting
therefrom shall be final and binding upon the parties hereto for purposes of
this Agreement. The fees and disbursements of the Selected Firm shall be paid by
Buyer and Seller as the Selected Firm shall determine based upon its assessment
of the relative merits of the positions taken by each in any disagreement
presented to such firm. Buyer will grant Seller full access to the books and
records of the Entertainment Companies and its relevant personnel in order for
it to make its evaluations under this Section 2.03.
(d) If the Preliminary Cash Payment is less than
such amount derived from the Final Statement (such difference being referred to
herein as the "Unpaid Balance"), then, in addition to the amount payable to
Seller under Section 2.01(a) of this Agreement, within five (5) Business Days
after the final determination of the Final Statement, Buyer shall deliver to
Seller an amount equal to the Unpaid Balance, together with interest thereon at
the Reference Rate in effect from time to time from the Closing Date until the
date of such payment, in cash in immediately available funds by wire transfer to
a bank account designated in writing by Seller prior to the due date thereof.
(e) If the Preliminary Cash Payment is greater
than such amount derived from the Final Statement (such difference being
referred to herein as an "Overpayment"), then within five (5) Business Days
after the final determination of the Final Statement, Seller shall reimburse to
Buyer an amount equal to the Overpayment, together with interest thereon at the
Reference Rate in effect from time to time from the Closing Date until the date
of such reimbursement, in cash in immediately available funds by wire transfer
to a bank account designated in writing by Buyer prior to the due date thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
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3.01. Ownership of Stock. Seller is the legal and beneficial
owner of all of the Shares, free and clear of all Share Encumbrances. The
delivery to Buyer of the Shares pursuant to the provisions of this Agreement
will transfer to Buyer valid title thereto, free and clear of any and all Share
Encumbrances. All of the Shares have been duly authorized and were validly
issued and are fully paid and nonassessable and were not issued in violation of
any preemptive rights. The Shares represent all of the issued and outstanding
shares of capital stock of Orion. There are not, and on the Closing Date there
will not be, outstanding (i) any options, warrants, rights of first refusal or
other rights to purchase from Seller or Orion any capital stock of Orion, (ii)
any securities convertible into or exchangeable for shares of such stock or
(iii) any other commitments of any kind for the issuance of additional shares of
capital stock or options, warrants or other securities of Orion (such options,
warrants, rights of first refusal or other rights, convertible securities,
exchangeable securities or other commitments are referred to herein collectively
as "Equity Securities"). There is no contract, right or option outstanding to
require Seller or Orion to redeem, purchase or otherwise reacquire any Equity
Securities of Orion, and there are no preemptive rights with respect to any
Equity Securities of Orion.
3.02. Corporate Existence and Power. Each of Seller and Orion
is a corporation duly incorporated, validly existing and in good standing under
the laws of the state of its incorporation, and has all corporate power and
authority to enter this Agreement and consummate the transactions contemplated
hereby. Orion is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and could not reasonably be expected to be,
material.
3.03. Corporate Authorization of Seller. This Agreement has
been duly and validly executed by Seller and constitutes the legal, valid and
binding agreement of Seller, enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally; provided, however, that the legality, validity, binding effect and
enforceability of this Agreement against Seller is not limited by the Bankruptcy
Cases; and provided, further, that the consummation by Seller of the Closing and
the transfer of the Shares are subject to the approval of Seller's stockholders.
3.04. Subsidiaries. Schedule 3.04 sets forth a complete list
of each direct or indirect Subsidiary of Orion, its jurisdiction of
organization, the authorized capital stock of each such Subsidiary, the number
of shares of outstanding capital stock of each such Subsidiary and the owners
thereof. All such issued and outstanding shares of capital stock of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate power and all material governmental licenses, governmental
authorizations, governmental consents and governmental approvals required to
carry on the business as now conducted by such Subsidiary and to own and operate
the business as now owned and operated by such Subsidiary. Except as disclosed
in Schedule 3.04, no Subsidiary holds any of its issued and outstanding shares
of capital stock in its treasury, and there are not, and on the Closing Date
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there will not be, outstanding any Equity Securities of or with respect to such
Subsidiary. Except as otherwise disclosed in Schedule 3.04, Orion or a
wholly-owned Subsidiary of Orion owns, directly or indirectly, free and clear of
all Share Encumbrances, all of the outstanding capital stock or other Equity
Securities of each of its Subsidiaries identified in Schedule 3.04. No
Subsidiary is required to be qualified to conduct business in any state other
than: (a) the states set forth in Schedule 3.04, in which states the relevant
Subsidiary is duly qualified and in good standing, and (b) such states where the
failure to be so qualified, whether singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.05. Entertainment Group. Other than the assets of Landmark
reflected in the Landmark Financial Statements, Orion and its Subsidiaries
together own all of the assets of the "Entertainment Group" as described in
Seller's most recent report filed with the Securities and Exchange Commission
(the "SEC") on Form 10-K.
3.06. Corporate Authorization of Orion. The execution,
delivery and performance by Orion of this Agreement and the consummation by
Orion of the transactions contemplated hereby are within Orion's corporate
powers and have been duly authorized by all necessary corporate action on the
part of Orion. This Agreement has been duly and validly executed by Orion and
constitutes the legal, valid and binding agreement of Orion, enforceable against
it in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally; provided, however, that the legality, validity,
binding effect and enforceability of this Agreement against Orion is not limited
by the Bankruptcy Cases.
3.07. Governmental Authorization. The execution, delivery and
performance by Seller and Orion of this Agreement requires no action by, consent
or approval of, or filing with, any Governmental Authority other than (a)
compliance with any applicable requirements of the HSR Act, (b) the filing of a
preliminary and definitive proxy statement with the SEC and (c) any actions,
consents, approvals or filings otherwise expressly referred to in Section 3.15
hereof.
3.08. Non-Contravention. The execution, delivery and
performance by Seller and Orion of this Agreement, and consummation of the
transactions contemplated hereby, including without limitation, the transfer of
the Shares to Buyer, do not and will not (a) contravene or conflict with the
articles or certificate of incorporation or bylaws of Seller or any
Entertainment Company, true and correct copies of all of which have been
delivered to Buyer by Seller; (b) assuming receipt of the Required Consents,
contravene or conflict with or constitute a violation of any provision of any
material Applicable Law binding upon or applicable to Seller or any
Entertainment Company; (c) except as set forth on Schedule 3.08(c), constitute a
default under or give rise to any right of termination, cancellation or
acceleration of, or to a loss of any benefit to which Seller or any
Entertainment Company is entitled under, any material Contract to which it is a
party or any material Permit or similar authorization; or (d) except as set
forth on Schedule 3.08(c), result in the creation or imposition, under any
Contract of any Entertainment Company or Applicable Law, or any Lien on the
Shares or on any asset of any Entertainment Company or of Buyer or any
Subsidiary of Buyer, or impose any contractual obligation or
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restriction under such Contract on Buyer or any Subsidiary of Buyer (other than
Orion and its Subsidiaries).
3.09. Financial Statements; Undisclosed Liabilities.
Schedule 3.09 contains true and complete copies of (i) the audited balance
sheets and related statements of operations and retained earnings and of cash
flows for Orion and its consolidated Subsidiaries for the years ended December
31, 1995 and December 31, 1996 (the "Annual Statements"), (ii) the pro forma
balance sheets for Orion and its consolidated Subsidiaries as at December 31,
1996 and March 31, 1997 (which March 31, 1977 balance sheet shall be delivered
on or before May 14, 1997)(1), adjusted to reflect distribution of the capital
stock of Landmark to Seller as if it had occurred on the date thereof (the "Pro
Forma Statements") and (iii) the balance sheets and related statements of
operations for the three month periods ended March 31, 1996 and March 31, 1997
which shall be delivered on or before May __, 1997 (collectively, the "Interim
Statements" and, together with the Annual Statements and the Pro Forma
Statements, the "Financial Statements"). The December 31, 1996 balance sheet
referred to in clause (i) above is referred to herein as the "1996 Balance
Sheet." Each of the Financial Statements has been prepared based on the books
and records of Orion and its Subsidiaries in accordance with GAAP and their
normal accounting practices, consistent with past practice and with each other,
and present fairly the financial condition, results of operations and cash flows
of Orion and its Subsidiaries as of the dates indicated or for the periods
indicated, subject in the case of the Interim Statements to normal year-end
audit adjustments, which adjustments in the aggregate are not material. The
adjustments made to the balance sheet included in the Annual Statement in the
preparation of the Pro Forma Statements were reasonable in all material
respects. Except as set forth on Schedule 3.09, there are no Liabilities of any
Entertainment Company other than: (i) any Liability accrued as a Liability on
the 1996 Balance Sheet; (ii) Liabilities specifically disclosed and identified
as such in the schedules to this Agreement; (iii) Liabilities incurred since the
date of the 1996 Balance Sheet that do not, and will not, individually or in the
aggregate, have a Material Adverse Effect; and (iv) Liabilities incurred since
the date of the 1996 Balance Sheet that have been incurred in the ordinary
course of business of any of the Entertainment Companies.
3.10. Absence of Certain Changes. Since the date of the
1996 Balance Sheet, each Entertainment Company has conducted its business in the
ordinary course consistent with past practice, and without limitation, there has
not been:
(a) any event, occurrence, development or state
of circumstances or facts or change in the assets, liabilities, business,
operations, financial conditions or prospects of any Entertainment Company that
has had or that may be reasonably expected to have, either alone or together
with all such events, occurrences, developments, states of circumstances or
facts or changes, a Material Adverse Effect;
--------
(1) This date will be seven (7) days after the Agreement is signed.
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(b) any incurrence, assumption or guarantee of
any Debt by any Entertainment Company other than drawdowns under the Existing
Orion Credit Facility and the Union Bank Loan;
(c) any creation, assumption or sufferance of
the existence of any Lien other than Permitted Liens created, assumed or
suffered to exist in the ordinary course of business consistent with past
practice;
(d) any transaction or commitment made, or
any Contract entered into, by any Entertainment Company (including the
acquisition or disposition of any assets), or any waiver, amendment, termination
or cancellation of any Contract by any Entertainment Company, or any
relinquishment of any rights thereunder by any Entertainment Company, or of any
other right or debt owed to any Entertainment Company, other than in each such
case actions taken in the ordinary course of business consistent with past
practice;
(e) except as set forth in Schedule 3.10(e),
any (i) grant of any severance, continuation or termination pay to any director,
officer, stockholder or employee of any Entertainment Company or any Associate
of any of the foregoing, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer, stockholder or employee of any
Entertainment Company or any Associate of any of the foregoing, (iii) increase
in benefits payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any director, officer,
stockholder or employee of any Entertainment Company or any Associate of any of
the foregoing, (iv) increase in compensation, bonus or other benefits payable or
potentially payable to directors, officers, stockholders or employees of any
Entertainment Company or any Associate of any of the foregoing, other than in
the ordinary course of business consistent with past practice or pursuant to
existing Contracts, or (v) change in the terms of any bonus, pension, insurance,
health or other Benefit Plan of Seller or any Entertainment Company;
(f) any loan to or guarantee or assumption of
any loan or obligation on behalf of any stockholder, director, officer or
employee of Seller or any Entertainment Company or of any Associate of any of
the foregoing, except business expense advances to employees of any
Entertainment Company occurring in the ordinary course of business consistent
with past practice;
(g) except as required by GAAP, any material
change by any Entertainment Company in its accounting principles, methods or
practices or in the manner it keeps its books and records or any material change
by any Entertainment Company of its current practices with regards to inventory,
sales, receivables, payables or accrued expenses which would affect the timing
of collection of receivables or the payment of payables ;
(h) any distribution, dividend, bonus or other
payment by any Entertainment Company to Seller or any Affiliate of Seller (other
than any Entertainment Company) or any officer, director, stockholder or
Affiliate of Seller or any Entertainment Company or any of their respective
Affiliates or Associates (collectively, "Distributions"), except
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for the distribution of Landmark as set forth in Schedule 3.10(h) or occurring
in the ordinary course of business consistent with past practice;
(i) any payment, discharge or satisfaction of
any Liabilities of any Entertainment Company, other than payments, discharges or
satisfactions in the ordinary course of business consistent with past practice;
or
(j) (i) any payment, discharge or other
satisfaction of any claim, liability or obligation owed to any Entertainment
Company by Seller or any of its Affiliates (other than any Entertainment
Company) or owed to Seller or any of its Affiliates (other than any
Entertainment Company) by any Entertainment Company or (ii) any prepayment of
any Debt (other than payments of revolving loans made under the Existing Orion
Credit Facility).
3.11. Properties; Leases; Tangible Assets.
(a) Except for Permitted Liens and those Liens
identified on Schedule 3.11(a), the Entertainment Companies own all of the
assets (real, personal or mixed, tangible or intangible (including the
Intellectual Property Rights)) reflected in the 1996 Balance Sheet (except those
assets disposed of in the ordinary course of business after the date thereof and
the Films), free and clear of all Liens.
(b) All tangible properties and assets (other
than the Films) and premises owned or leased by the Entertainment Companies are
in good condition and repair and are adequate in all material respects for the
uses to which they are put, and no tangible properties or assets necessary for
the conduct of the business of any Entertainment Company in substantially the
same manner as it has heretofore been conducted are in need of replacement,
maintenance or repairs, except for routine and not materially deferred
replacement, maintenance and repair.
(c) Schedule 3.11(c) sets forth a true and
complete list of all material personal property leases (the "Personal Property
Leases") and all leases of real property (the "Real Property Leases" and
collectively with the Personal Property Leases, the "Leases") to which any
Entertainment Company is a party or by which any Entertainment Company is bound.
With respect to the Leases, except as set forth on Schedule 3.11(c), there exist
no defaults by any Entertainment Company, or, to the knowledge of Seller, any
default or threatened default by any lessor or third party thereunder, that has
affected or could reasonably be expected to materially affect the rights and
privileges thereunder of any Entertainment Company. Assuming the Required
Consents are obtained, the sale of the Shares to Buyer will not adversely affect
any Leases with non-Affiliates to which any Entertainment Company is a party or
by which any Entertainment Company is bound.
(d) No real property is owned by any
Entertainment Company except as set forth on Schedule 3.11(d).
3.12. Affiliates. Except as set forth in Schedule 3.12,
to the knowledge of Seller, no stockholder of Seller or any officer or director
of Seller or any Entertainment Company (or any immediate family member of any
such officer or director):
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(a) now has or at any time subsequent to
January 1, 1996 had, directly or indirectly, an equity interest in, or holds
debt of, any Person which furnishes or sells or during such period furnished or
sold services or products to any Entertainment Company or purchases or during
such period purchased from any Entertainment Company any goods or services, or
otherwise does or during such period did business with any Entertainment
Company; provided, however, that no stockholder of Seller or any Entertainment
Company or any of their respective officers, directors or other Affiliates shall
be deemed to have such an interest (A) solely by virtue of the ownership of less
than five percent (5%) of the outstanding voting stock or debt securities of any
publicly held company, the stock or debt securities of which are traded on a
national stock exchange or quoted on the National Association of Securities
Dealers Automated Quotation System or (B) by reason of having such an interest
in Seller or such Entertainment Company; or
(b) now is or at any time subsequent to
January 1, 1996 was, directly or indirectly, a party to any contract, commitment
or agreement to which any Entertainment Company is or during such period was a
party or under which any Entertainment Company is or was obligated or bound or
to which any Entertainment Company's properties may be or may have been subject.
3.13. Litigation. Except as disclosed in Schedule 3.13,
(i) there are no actions, claims, suits, hearings, arbitrations, proceedings
(public or private) or, to Seller's knowledge, governmental investigations, that
have been brought by or against any Governmental Authority or any other Person
(collectively, "Proceedings") pending or, to the knowledge of Seller,
threatened, against or by any Entertainment Company or against Seller with
respect to or relating to any Entertainment Company other than collection
actions by any Entertainment Company involving claims of amounts less than
Twenty Five Thousand Dollars ($25,000), or which seek to enjoin or rescind the
transactions contemplated by this Agreement or otherwise seek to prevent Seller
from complying with the terms and provisions of this Agreement, and (ii) there
are no existing orders, judgments or decrees of any Governmental Authority
affecting any of the Entertainment Companies. All matters identified on Schedule
3.13 in the aggregate will not have a Material Adverse Effect.
3.14. Contracts.
(a) Schedule 3.14(a) sets forth a complete list
of all material Contracts (collectively with the Leases and the Employment
Agreements, the "Scheduled Contracts") including, without limitation:
(i) each Contract (other than License
Agreements) between any Entertainment Company and (A) except as
disclosed in Schedule 3.12 and Schedule 3.17(a), each present or former
director, officer or other member of management or other personnel of
any Entertainment Company, (B) any supplier of services or products
(other than Films) to the Entertainment Companies whose dollar volume
of sales to the Entertainment Companies taken as a whole exceeded in
1996 Five Hundred Thousand Dollars ($500,000), and (C) any Person in
which the aggregate payments made to the Entertainment Companies taken
as a whole under such Contract exceeded in 1996 Five Hundred Thousand
Dollars ($500,000);
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(ii) each other agreement or arrangement
of any Entertainment Company that requires the payment or incurrence of
Liabilities, or the rendering of services, by an Entertainment Company,
subsequent to the date hereof of more than Five Hundred Thousand
Dollars ($500,000) or that is reasonably expected to require payment of
more than Five Hundred Thousand Dollars ($500,000) in the aggregate;
(iii) all Contracts relating to, and evidences
of or guarantees of, or providing security for Debt or the deferred
purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset);
(iv) all partnership, joint venture or other
similar Contracts, arrangements or agreements, excluding those
Contracts which relate to partnerships or joint ventures formed for the
purpose of producing one or more Films;
(v) all License Agreements to which any
Entertainment Company is a party or by which any Entertainment Company
is otherwise bound in which the aggregate payments to be made to or by
any Entertainment Company under such License Agreement subsequent to
the date hereof are more than Seven Hundred Fifty Thousand Dollars
($750,000) or are reasonably expected to require payment of more than
Seven Hundred Fifty Thousand Dollars ($750,000) in the aggregate; and
(vi) all License Agreements or other
Contracts that constitute output deals or similar arrangements.
(b) Except as disclosed in Schedule 3.14(b),
each Scheduled Contract relating to any Entertainment Company is a legal, valid
and binding obligation of each Entertainment Company that is party thereto and,
to the knowledge of Seller, each other party thereto, enforceable against each
such Entertainment Company that is party thereto and, to the knowledge of
Seller, each such other party thereto, in accordance with its terms, except to
the extent that unenforceability would not adversely affect any Entertainment
Company's rights thereunder or as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and neither any Entertainment Company that is party thereto
nor, to the knowledge of Seller, any other party thereto, is in material default
or has failed to perform any material obligation thereunder. Complete and
correct copies of each Scheduled Contract have been delivered or made available
to Buyer. There is no default or failure to perform under other Contracts which
could reasonably be expected to have a Material Adverse Effect.
(c) Except as disclosed in Schedule 3.14(c),
each Entertainment Company has paid all material Participations due and payable
by it as of the date hereof in accordance with past practice as such practice
relates to the timing of such payments, and no Entertainment Company is in
default or has failed to perform any obligation with respect to the payment of
any such material Participations.
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3.15. Permits; Required Consents.
(a) Schedule 3.15(a) sets forth all material
approvals, authorizations, certificates, consents, licenses, orders and permits
or other similar authorizations of all Governmental Authorities (and all other
Persons) necessary for the operation of the Entertainment Companies in
substantially the same manner as currently operated or affecting or relating in
any way to the Entertainment Companies (the "Permits").
(b) Schedule 3.15(b) lists (i) each
governmental or other registration, filing, application, notice, transfer,
consent, approval, order, qualification and waiver (each, a "Required
Governmental Approval") required under Applicable Law to be obtained by Seller
or any Entertainment Company by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby to avoid
the loss of any material Permit or otherwise, (ii) each Scheduled Contract with
respect to which the consent of the other party or parties thereto must be
obtained by Seller or any Entertainment Company by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Contract, the termination
thereof, a breach or default thereunder or any other change or modification to
the terms thereof (each, a "Required Contractual Consent") and (iii) each
Required Contractual Consent which Seller and Buyer have mutually agreed is
critical to the consummation of the transactions contemplated hereby as set
forth on Schedule 3.15(b) (each, an "Essential Consent" and collectively with
the Required Governmental Approvals and the Required Contractual Consents, the
"Required Consents"). Except as set forth in Schedule 3.15(b), each Permit is
valid and in full force and effect in all material respects and, assuming the
related Required Consents have been obtained prior to the Closing, are or will
be transferable by Seller, and assuming the related Required Consents have been
obtained prior to the Closing, none of the Permits will be terminated or become
terminable or impaired in any material respect as a result of the transactions
contemplated hereby. To the knowledge of Seller, there are no facts relating to
the identity or circumstances of Seller that would prevent or materially delay
obtaining any of the Required Consents.
3.16. Compliance with Applicable Laws. Except as set
forth in Schedule 3.16, the operation of the respective business of each
Entertainment Company has not violated or infringed, and does not violate or
infringe, any Applicable Law in a manner that may reasonably be expected to
have, either alone or together with all such violations or infringements, a
Material Adverse Effect.
3.17. Employment Agreements; Change in Control; and
Employee Benefits.
(a) Except as set forth on Schedule 3.17(a),
there are no employment, consulting, severance pay, continuation pay,
termination pay or indemnification agreements or other similar agreements of any
nature whatsoever (collectively, "Employment Agreements" between or binding upon
any Entertainment Company, on the one hand, and any current or former
stockholder, officer, director, employee or Affiliate of any Entertainment
Company or any of their respective Associates or any consultant or agent of any
Entertainment Company, on the other hand, that are currently in effect other
than any such Employment Agreement that does not
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provide for the payment of more than One Hundred Thousand Dollars ($100,000) in
the aggregate in any year.
(b) Except as set forth on Schedule 3.17(b),
there are no Employment Agreements or any other similar agreements to which any
Entertainment Company is a party or by which it is bound under which the
transactions contemplated by this Agreement (i) will require any payment by any
Entertainment Company or Buyer, or any consent or waiver from any stockholder,
officer, director, employee or Affiliate of any Entertainment Company or any of
their respective Associates or any consultant or agent of any Entertainment
Company, or Buyer or (ii) will result in any increase, acceleration, vesting or
other change in the compensation, benefits or other rights of any stockholder,
officer, director, employee or Affiliate of any Entertainment Company or any of
their respective Associates or any consultant or agent of any Entertainment
Company under any such Employment Agreement or other similar agreement.
(c) Schedule 3.17(c) sets forth all Benefit
Plans of Seller, in which any employees or former employees and their
beneficiaries of any Entertainment Company participate ("Entertainment Plans").
Seller has made available to Buyer true and correct copies of all governing
instruments and related agreements pertaining to such Entertainment Plans.
(d) Except as set forth in Schedule 3.17(d),
neither Seller nor any Entertainment Company nor any Affiliate or ERISA
Affiliate of Seller or any Entertainment Company sponsors or has ever sponsored,
maintained, contributed to, or incurred an obligation to contribute to, any
Employee Pension Benefit Plan. In connection with any Employee Pension Benefit
Plan currently maintained by any Entertainment Company or any ERISA Affiliate,
(i) there have been no accumulated funding deficiencies (within the meaning of
Code Section 412), whether or not waived, (ii) there have been no reportable
events (within the meaning of ERISA Section 4043(b)) other than any reportable
event that may arise in connection with the transactions contemplated by this
Agreement, and (iii) no circumstances exist that would warrant a termination of
any such plan by the Pension Benefit Guaranty Corporation pursuant to ERISA
Section 4042. No Employee Pension Benefit Plan has been terminated within the
last five years in other than a standard termination under Section 4041(b) of
ERISA and all liabilities under such plans have been adequately and properly
discharged. The foregoing applies only to the extent any of the events results
in a material Liability of any Entertainment Company.
(e) Except as set forth in Schedule 3.17(e),
neither Seller nor any Entertainment Company nor any Affiliate or ERISA
Affiliate of Seller or any Entertainment Company sponsors or has ever sponsored,
maintained, contributed to, or incurred an obligation to contribute to any
Multiemployer Plan. Neither Seller nor any Entertainment Company nor any of
their ERISA Affiliates has at any time withdrawn from a Multiemployer Plan in a
complete withdrawal or a partial withdrawal, as such terms are defined in ERISA
Sections 4203 and 4205, respectively, so as to result in any liability,
contingent or otherwise, to Seller, any Entertainment Company or any of their
ERISA Affiliates. All contributions required to be made by Seller, any
Entertainment Company or any of their ERISA Affiliates to each Multiemployer
Plan have been made when due. To the best knowledge of Seller, with respect to
each Multiemployer Plan, (i) no such plan has been terminated or has been in
reorganization under ERISA so as to result, directly or indirectly, in any
liability, contingent or otherwise, of Seller, any Entertainment Company or
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any of their ERISA Affiliates under Title IV of ERISA; (ii) no proceeding has
been initiated by any Person (including the PBGC) to terminate any such plan;
(iii) Seller, any Entertainment Company and any of their ERISA Affiliates have
no reason to believe that any Multiemployer Plan will be terminated or
reorganized; and (iv) Seller, each Entertainment Company and their ERISA
Affiliates do not expect to withdraw from any Multiemployer Plan.
(f) Except as set forth in Schedule 3.17(f), no
agreement, commitment or obligation exists to increase benefits under any
Entertainment Plan or to adopt any new Entertainment Plan. Further, no
individual shall accrue or receive additional benefits, service or accelerated
rights to payments of benefits under any Benefit Plan, including the right to
receive any parachute payment, as defined in Section 280G of the Code, or become
entitled to severance, termination allowance or similar payments as a direct
result of the transactions contemplated hereby, and neither Seller nor any
Entertainment Company is a party to any agreement or arrangement that could
result in the payment of any such benefits or payments.
(g) No Entertainment Plan has participated in,
engaged in or been a party to any non-exempt Prohibited Transaction, and none of
Seller, any Entertainment Company or any Affiliate or ERISA Affiliate of Seller
or any Entertainment Company has had asserted against it any material claim for
taxes under Chapter 43 of Subtitle A of the Code and Section 5000 of the Code,
or for material penalties under ERISA Section 502(c), (i) or (l), with respect
to any Employee Benefit Plan nor, to the knowledge of Seller, is there a
material basis for any such claim. No officer, director or employee of Seller or
any Entertainment Company has committed a material breach of any responsibility
or obligation imposed upon fiduciaries by Title I of ERISA with respect to any
Entertainment Plan, with respect to which breach Seller or any Entertainment
Company is or could be directly or indirectly liable.
(h) Other than routine claims for benefits,
there is no claim pending, or to the knowledge of Seller, threatened, involving
any Entertainment Plan by any Person against such plan or Entertainment Company.
There is no pending, or to the knowledge of Seller, threatened, proceeding
involving any Employee Benefit Plan before the IRS, the United States Department
of Labor or any other Governmental Authority that affects an Entertainment Plan.
(i) There is no material violation of any
reporting or disclosure requirement imposed by ERISA or the Code with respect to
any Entertainment Plan.
(j) Each Entertainment Plan has at all times
prior hereto been maintained in all material respects, by its terms and in
operation, in accordance with ERISA and the Code. Seller, each Entertainment
Company and their respective Affiliates and ERISA Affiliates have made full and
timely payment of all amounts required to be contributed under the terms of each
Entertainment Plan and Applicable Law or required to be paid as expenses under
such Entertainment Plan, and Seller and each Entertainment Company and their
respective Affiliates and ERISA Affiliates shall continue to do so through the
Closing. Each Entertainment Plan that is intended to be qualified under Section
401(a) of the Code is and has always been so qualified, and either has received
a favorable determination letter with respect to such qualified status from the
IRS or has filed a request for such a determination letter with the IRS within
the
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remedial amendment period such that such determination of qualified status
will apply from and after the effective date of any such Entertainment Plan.
(k) With respect to any Group Health Plans
maintained by Seller, any Entertainment Company or any Affiliates or ERISA
Affiliates of Seller or any Entertainment Company, whether or not for the
benefit of the employees of Seller, any Entertainment Company, Affiliates or its
ERISA Affiliates, Seller, the Entertainment Companies and their respective
Affiliates and ERISA Affiliates have complied in all material respects with the
provisions of Part 6 of Title I of ERISA and 4980B of the Code. No Entertainment
Company is obligated to provide health care benefits of any kind to any retired
employees pursuant to any Employee Benefit Plan, including without limitation
any Group Health Plan, or pursuant to any agreement or understanding, other than
as required by applicable law.
(l) Seller and the Entertainment Companies have
made available to Buyer a copy of the three (3) most recently filed Federal Form
5500 series and accountant's opinion, if applicable, for each Entertainment
Plan.
3.18. Labor and Employment Matters.
(a) Except as set forth on Schedule 3.18(a),
no collective bargaining agreement exists that is binding on any Entertainment
Company and, except as described on Schedule 3.18(a), no petition has been filed
or proceedings instituted by an employee or group of employees with any labor
relations board seeking recognition of a bargaining representative at any time
subsequent to January 1, 1993. Schedule 3.18(a) describes any organizational
effort currently being made or threatened by or on behalf of any labor union to
organize any employees of any Entertainment Company.
(b) Except as set forth on Schedule 3.18(b),
(i) there is no labor strike, dispute, slow down or stoppage pending or, to the
knowledge of Seller, threatened, against or directly affecting any Entertainment
Company, (ii) no grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is pending, and no claims therefor exist, and
(iii) no Entertainment Company nor any Affiliate of any Entertainment Company
has received any notice or has any knowledge of any threatened labor or civil
rights dispute, controversy or grievance or any other unfair labor practice
proceeding or breach of contract claim or action with respect to claims of, or
obligations to, any employee or group of employees of any Entertainment Company.
(c) Each of the Entertainment Companies has
complied and are currently complying, in respect of all employees of any
Entertainment Company, with any Applicable Law respecting employment and
employment practices and the protection of the health and safety of employees,
from whatever source such law may be derived, including, without limitation,
statutes, ordinances, laws, rules, regulations, policies, standards, judicial or
administrative precedents, judgments, orders, decrees, awards, citations,
licenses, official interpretations and guidelines, except for instances of
noncompliance which could not be reasonably expected to have, alone or in the
aggregate, a Material Adverse Effect.
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(d) All individuals who are performing or have
performed services for any Entertainment Company or any Affiliate thereof and
are or during 1995 or 1996 were classified by any of the Entertainment Companies
as "independent contractors" qualify for such classification under Section 530
of the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of 1986, as
applicable, except for such instances which are not, in the aggregate, material.
3.19. Intellectual Property.
(a) Other than copyright registrations,
applications and claims relating to the Films and common law trademark rights in
the titles of the Films, Schedule 3.19(a) sets forth a complete and correct list
of all (i) foreign and United States federal and state patent, trademark, trade
name, service ▇▇▇▇ and copyright registrations, (ii) foreign and United States
federal and state patent, trademark, trade name, service ▇▇▇▇ and copyright
applications for registration, (iii) common law claims to trademarks, service
marks and trade names, (iv) claims of copyright which exist although no
registrations have been issued with respect thereto, (v) fictitious business
name filings with any state or local Governmental Authority and (vi) inventions,
discoveries, concepts, ideas, drawings, designs, original works of authorship,
computer programs, know-how, research and development, techniques, data, trade
secrets and other proprietary and intellectual property rights owned by any of
the Entertainment Companies (collectively, the "Owned Intellectual Property
Rights").
(b) Other than copyright registrations,
applications and claims relating to the Films and common law trademark rights in
the titles of the Films, Schedule 3.19(b) sets forth a complete and correct list
of all (i) foreign and United States federal and state patent, trademark, trade
name, service ▇▇▇▇ and copyright registrations, (ii) foreign and United States
federal and state patent, trademark, trade name, service ▇▇▇▇ and copyright
applications for registration, (iii) common law claims to trademarks, service
marks and trade names, (iv) claims of copyright which exist although no
registrations have been issued with respect thereto, (v) fictitious business
name filings with any state or local Governmental Authority and (vi) inventions,
discoveries, concepts, ideas, drawings, designs, original works of authorship,
computer programs, know-how, research and development, techniques, data, trade
secrets and other proprietary and intellectual property rights which any of the
Entertainment Companies has a valid license to use, including a description of
all Persons from whom any of the Entertainment Companies have obtained such
rights and the material terms of such licenses (collectively, the "Licensed
Intellectual Property Rights"). The Owned Intellectual Property Rights and the
Licensed Intellectual Property Rights are collectively referred to herein as the
"Intellectual Property Rights."
(c) Schedule 3.19(c) lists all licenses
pursuant to which any of the Entertainment Companies have licensed any Person to
use any Intellectual Property Rights. No Person is in default in any material
respect with respect to its obligations under any of the licenses set forth in
Schedule 3.19(c).
(d) Except as set forth in Schedule 3.19(d),
(i) no claim is pending or, to Seller's knowledge, threatened to the effect that
the present or past use of the Intellectual Property Rights by any of the
Entertainment Companies infringes upon or conflicts with or
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violates any patent, patent license, patent application, trademark, tradename,
trademark or tradename registration, copyright, copyright registration, service
▇▇▇▇ or any pending application relating thereto, or any trade secret, know-how,
program or process, or common law rights in respect of any of the foregoing, or
any similar rights, of any Person, (ii) use, sale or licensing of the
Intellectual Property Rights by the relevant Entertainment Company does not
infringe upon or violate any rights of any other Person, (iii) to the knowledge
of Seller, no Person is infringing in any material respect upon the rights of
any of the Entertainment Companies in and to the Intellectual Property Rights
and (iv) the Intellectual Property Rights are not subject to any Lien other than
Permitted Liens and Liens granted in connection with the Existing Credit
Facility which shall be extinguished on or before the Closing. Except as set
forth on Schedule 3.19(d), no Intellectual Property Right of any of the
Entertainment Companies is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the relevant
Entertainment Company or, in the case of any Intellectual Property Right
licensed to others, restricting the sale, transfer, assignment or licensing
thereof by the relevant Entertainment Company to any Person.
(e) Except for Participations or as set forth
on Schedule 3.19(e), no Entertainment Company is obligated to make royalty or
other payments to any owner of, licensor of, other claimant to or any other
Person regarding any Intellectual Property Rights.
3.20. Library Films.
(a) Ownership. All Films set forth on Schedule
3.20(a) are designated therein as "A Films" and "B Films," and all of such A
Films and B Films shall be referred to collectively herein as the "Library
Films." Schedule 3.20(a)(i) identifies the availability dates of those A Films
and B Films which are currently being exploited by Seller, in each media, in the
territories indicated. Schedule 3.20(a)(ii) identifies all distribution rights
owned or controlled by the Entertainment Companies with respect to each Library
Film. Schedule 3.20(a)(iii) identifies all Films which Seller deems to be
"dormant." Except as set forth on Schedule 3.20(a)(iv), the Library Films are
free and clear of all Liens other than Permitted Liens and Liens disclosed on
Schedule 3.11(a).
(b) Ratings. Except as disclosed in
Schedule 3.20(b), each A Film that is a feature-length motion picture was
produced in color on either 35MM or 70MM film, was submitted to the Motion
Picture Association of America ("MPAA") for rating, was released theatrically in
the United States with a rating that is not more restrictive than the current
rating equivalent to an "R" under the present system or its equivalent rating
under any successor system and was produced primarily in the English language.
(c) Elements. Schedule 3.20(c) identifies
all available Elements owned or controlled by the Entertainment Companies
relating to the Library Films listed therein. The Entertainment Companies have
laboratory access letters with respect to those Elements which the Entertainment
Companies do not own. With respect to each such Library Film identified, the
Elements identified are sufficient to produce copies, prints, video products and
other reproductions for exploitation in the theatrical, non-theatrical,
television and video and audio markets that are of such quality as is consistent
with past practice of the Entertainment
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Companies. Schedule 3.20(c) identifies the correct identification and location
of each laboratory and other place which holds any of the foregoing Elements
relating to such Library Films.
(d) No Violation of Third Party Rights. No A
Film, nor any B Film that is currently being exploited by Seller, nor any part
thereof, nor any of the literary, dramatic or musical material contained therein
or upon which any such Film is based, nor the exercise by any authorized person
or entity of any right granted to any of the Entertainment Companies in
connection therewith will violate or infringe upon the trademark, service ▇▇▇▇,
tradename, copyright, literary, dramatic, music, artistic, personal, private,
civil, contract or property right or rights of privacy or any other right,
whether tangible or intangible, of any Person.
(e) Clearances. The relevant Entertainment
Company has obtained proper and effective licenses or grants of authority to use
the results and proceeds of the services of performers and other Persons
connected with the production of the A Films to the extent reasonably necessary
or desirable to exercise all rights of such Entertainment Company therein.
(f) Copyrights. Except as specified on
Schedule 3.20(f), good and sufficient copyright notice is affixed to each A
Film. Except as set forth in Schedule 3.20(f), each A Film has been registered
with the United States Copyright Office.
(g) Music. Except as set forth in
Schedule 3.20(g), all non-dramatic music rights (so-called "small rights")
contained in the A Films are (i) available by license from American Society for
Composers, Authors and Publishers ("ASCAP"), Broadcast Music Inc. ("BMI") or
SESAC, Inc., (ii) in the public domain, or (iii) controlled by Orion or another
Entertainment Company directly or through licenses.
(h) Credits. The credits contained in the main
and end titles of the A Films comply in all material respects with all
obligations with respect thereto, including without limitation, contractual
obligations to third parties who rendered services in connection with the A
Films and all applicable guild agreements.
(i) Insurance Claims. Except as set forth on
Schedule 3.20(i), no insurance claims have been made and are currently
outstanding and unsettled as of the date of this Agreement on the producer's
errors and omissions policies that Orion or another Entertainment Company or any
of its predecessors maintained with respect to the A Films.
(j) Rights. Except as set forth on
Schedule 3.20(j), which Schedule sets forth any limitations out of the ordinary
course with respect to the use of performers' names and likenesses, editing
rights and credit rights and obligations with respect to the A Films, each
relevant Entertainment Company has, and has the right to grant to its
Affiliates, agents, subdistributors and licensees, the following rights on a
non-exclusive basis to the extent reasonably necessary or desirable to exploit
the A Films:
(i) Use of Performers' Names:
To disseminate, reproduce, print and publish the name,
likeness and biography of each performer, director, producer,
author and writer who rendered services in or in connection
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with the production of each A Film, for the purpose of
advertising, promoting and exploiting such A Film, except that
no use may be made so as to indicate or imply that any such
person or performer is endorsing a commercial product or
service; and
(ii) Editing Rights: To make
such cuts, alterations, additions and variations of and in any
part of the A Films (including the dubbing-in of languages) as
may be deemed necessary or appropriate by such Entertainment
Company in its sole discretion excluding, however, any right
to delete any logo, copyright notice or credit other than such
rights which would not adversely impact the value of each such
A Film.
(k) Compliance with Section 507. Each
Entertainment Company has conformed to the requirements of Section 507 of the
Federal Communications Act of 1934, as it may be amended or replaced in a more
or less restrictive version, concerning broadcast matter and disclosures
required thereunder, insofar as that section applies to persons furnishing
program material for television broadcasting. The following is an illustration
of the parties' understanding of Section 507, but in case of conflict the terms
of Section 507 will control. The Library Films do not include any matter for
which any money, service or other valuable consideration is directly or
indirectly paid, or promised to, or charged or accepted by Seller or any
Entertainment Company or to Seller's knowledge by any producer or independent
contractor connected with the Library Films. As used in this paragraph, the term
"service or other valuable consideration" shall not include any service or
property furnished without charge or at a nominal charge for use in, or in
connection with the Library Films, "unless it is so furnished in consideration
for an identification in a broadcast of any person, product, service, trademark
or brand name beyond an identification which is reasonably related to the use of
such service or property on the broadcast," as such terms are used in said
Section 507. The provisions of this clause shall not apply to feature motion
pictures produced initially and primarily for theater exhibition to the extent
the Federal Communications Commission continues to waive the requirements of
Section 317(b) of the Communications Act with respect to such motion pictures.
(l) Schedule 3.20(l) sets forth all
Participations as of March 31, 1997 with respect to each A Film.
3.21. Films In Progress.
(a) Costs. Schedule 3.21(a) sets forth for
each Entertainment Company a complete list of all Films currently in principal
photography, post-production or that have been completed but not delivered
(collectively, the "Films In Progress"), together with (i) a complete summary of
all costs and expenses paid by the relevant Entertainment Company in connection
with each Film In Progress to the date set forth therein, and (ii) Seller's
good-faith estimate of the cost to complete and deliver each Film In Progress.
(b) Ownership. Except as set forth on
Schedule 3.21(b), the relevant Entertainment Company, or an unaffiliated
production company from whom an Entertainment Company has the right to acquire
such rights pursuant to a Contract disclosed on a schedule to
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this Agreement (an "Unaffiliated Production Company"), owns all right, title and
interest of every kind and nature, worldwide, in all media, whether now known or
hereafter devised, in and to the Films In Progress. Except as set forth on
Schedule 3.21(b), the Films In Progress are, or will be when acquired by any
Entertainment Company, free and clear of all Liens other than Permitted Liens
and those Liens which are customarily incurred in connection with production
financing.
(c) Ratings. Except as disclosed in
Schedule 3.21(c), each Film In Progress that is a feature-length motion picture
is being produced in color on either 35MM or 70MM film, will be submitted to the
MPAA for rating, will be released theatrically in the United States with a
rating that is not more restrictive than the current rating equivalent to an "R"
under the present system or its equivalent rating under any successor system and
is being produced primarily in the English language.
(d) Elements. Schedule 3.21(d) identifies all
available Elements owned or controlled by the Entertainment Companies relating
to the Films In Progress listed therein. The Entertainment Companies have
laboratory access letters with respect to those Elements which the Companies do
not own. With respect to each such Film In Progress identified, the Elements
identified are sufficient to produce copies, prints, video products and other
reproductions for exploitation in the theatrical, non-theatrical, television and
video and audio markets that are of such quality as is consistent with past
practice of the Entertainment Companies. Schedule 3.21(d) sets forth the correct
identification and location of each laboratory and other place which holds any
of the foregoing Elements relating to such Films In Progress.
(e) Insurance Policies. The relevant
Entertainment Company or Unaffiliated Production Company has in effect errors
and omissions insurance coverage relating to each Film In Progress.
(f) Completion Bond. The relevant Entertainment
Company or Unaffiliated Production Company has in effect a completion bond
guaranteeing the completion and delivery of each Film In Progress according to
its terms.
(g) No Violation of Third Party Rights. No Film
In Progress, nor any part thereof, nor any of the literary, dramatic or musical
material contained therein or upon which any such Film In Progress is based, nor
the exercise by any authorized person or entity of any right granted to any of
the Entertainment Companies in connection therewith will violate or infringe
upon the trademark, service ▇▇▇▇, tradename, copyright, literary, dramatic,
music, artistic, personal, private, civil, contract or property right or rights
of privacy or any other right, whether tangible or intangible, of any Person.
(h) Clearances. The relevant Entertainment
Company or Unaffiliated Production Company has obtained proper and effective
licenses or grants of authority to use the results and proceeds of the services
of performers and other Persons connected with the production of the Films In
Progress to the extent reasonably necessary or desirable to exercise all rights
of such Entertainment Company therein.
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(i) Copyrights. Good and sufficient copyright
notice will be affixed to each Film In Progress in each case where such
affixation is possible. Except as set forth in Schedule 3.21(i), all screenplay
materials relating to each Film In Progress have been registered with the United
States Copyright Office.
(j) Music. Except as set forth in
Schedule 3.21(j), all non-dramatic music rights (so-called "small rights")
contained in the Films In Progress are (i) available by license from ASCAP, BMI
or SESAC, Inc., (ii) in the public domain, or (iii) controlled by Orion or
another Entertainment Company directly or through licenses.
(k) Credits. The credits contained in the main
and end titles of the Films In Progress, if any, comply in all material respects
with all obligations with respect thereto, including without limitation,
contractual obligations to third parties who rendered services in connection
with the Films In Progress and all applicable guild agreements.
(l) Insurance Claims. Except as set forth on
Schedule 3.21(l), no insurance claims have been made and are currently
outstanding and unsettled as of the date of this Agreement on the producer's
errors and omissions policies that Orion or another Entertainment Company or any
of its predecessors maintained with respect to the Films In Progress.
(m) Rights. Except as set forth in
Schedule 3.21(m), which Schedule sets forth any limitations out of the ordinary
course with respect to the use of performers' names and likenesses, editing
rights and credit rights and obligations with respect to the Films In Progress,
each relevant Entertainment Company has, and has the right to grant to its
Affiliates, agents, subdistributors and licensees the following rights on a
non-exclusive basis to the extent reasonably necessary or desirable to exploit
the Films In Progress:
(i) Use of Performers' Names: To
disseminate, reproduce, print and publish the name, likeness and
biography of each performer, director, producer, author and writer who
rendered services in or in connection with the production of each Film
In Progress, for the purpose of advertising, promoting and exploiting
such Film In Progress, except that no use may be made so as to indicate
or imply that any such person or performer is endorsing a commercial
product or service; and
(ii) Editing Rights: To make such cuts,
alterations, additions and variations of and in any part of the Films
In Progress (including the dubbing-in of languages) as may be deemed
necessary or appropriate by the relevant Entertainment Company in its
sole discretion excluding, however, any right to delete any logo,
copyright notice or credit other than such rights which would not
adversely impact the value of each such Film In Progress.
(n) Compliance with Section 507. Each
Entertainment Company has conformed to the requirements of Section 507 of the
Federal Communications Act of 1934, as it may be amended or replaced in a more
or less restrictive version, concerning broadcast matter and disclosures
required thereunder, insofar as that section applies to persons furnishing
program material for television broadcasting. The following is an illustration
of the parties' understanding
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of Section 507, but in case of conflict the terms of Section 507 will control.
The Films In Progress do not include any matter for which any money, service or
other valuable consideration is directly or indirectly paid, or promised to, or
charged or accepted by Seller or any Entertainment Company or to Seller's
knowledge by any producer or independent contractor connected with the Films In
Progress. As used in this paragraph, the term "service or other valuable
consideration" shall not include any service or property furnished without
charge or at a nominal charge for use in, or in connection with the Films In
Progress "unless it is so furnished in consideration for an identification in a
broadcast of any person, product, service, trademark or brand name beyond an
identification which is reasonably related to the use of such service or
property on the broadcast," as such terms are used in said Section 507. The
provisions of this clause shall not apply to feature motion pictures produced
initially and primarily for theater exhibition to the extent the Federal
Communications Commission continues to waive the requirements of Section 317(b)
of the Communications Act with respect to such motion pictures.
(o) Schedule 3.21(o) identifies all
Participations as of March 31, 1997 with respect to each Film In Progress.
3.22. Development Projects. Schedule 3.22 identifies all
projects in development by or on behalf of each Entertainment Company (the
"Development Projects") and all material Contracts relating thereto. The
relevant Entertainment Company owns all right, title and interest in and to such
Development Projects to the extent described therein.
3.23. Advisory Fees. Except for ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
Jennrette Securities Corporation (whose fees and expenses will be paid by
Seller), there is no investment banker, broker, finder or other intermediary or
advisor that has been retained by or is authorized to act on behalf of Seller or
any Entertainment Company who might be entitled to any fee, commission or
reimbursement of expenses from Buyer or any of its Affiliates or any of their
respective Associates or any Entertainment Company upon consummation of the
transactions contemplated by this Agreement.
3.24. Environmental Compliance.
(a) Except as disclosed in Schedule 3.24(a),
the Entertainment Companies have obtained all approvals, authorizations,
certificates, consents, licenses, orders and permits or other similar
authorizations of all Governmental Authorities, or from any other Person, that
are required under any Environmental Law. Schedule 3.24(a) also sets forth all
permits, licenses and other authorizations issued under any Environmental Law to
any Entertainment Company.
(b) Except as disclosed in Schedule 3.24(b),
the Entertainment Companies are in compliance in all material respects with all
terms and conditions of all approvals, authorizations, certificates, consents,
licenses, orders and permits or other similar authorizations of all Governmental
Authorities (and all other Persons) required under all Environmental Laws and
are in compliance in all material respects with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws.
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(c) Except as disclosed in Schedule 3.24(c),
there are no past or present events, conditions, circumstances, activities,
practices, incidents, actions, omissions or plans relating to or in any way
affecting any Entertainment Company that could reasonably be expected to
interfere with or prevent continued compliance with any Environmental Law by any
Entertainment Company or Buyer after the Closing, or that may give rise to any
Environmental Liability, or otherwise form the basis of any claim, action,
demand, suit, Proceeding, hearing, study or investigation (i) under any
Environmental Law, (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any Hazardous Substance, or (iii) resulting
from exposure to workplace hazards.
3.25. Insurance. Schedule 3.25 sets forth a complete and
correct list of all insurance policies of any kind or nature whatsoever
currently in force or in force at any time subsequent to January 1, 1995 with
respect to the Entertainment Companies (the "Insurance Policies"), including
without limitation all "occurrence based" liability policies, all errors and
omissions policies and all production package policies. For each Insurance
Policy, Schedule 3.25 indicates the type of coverage, the name of the insureds,
the insurer, the expiration date, the period to which it relates, the
deductibles and loss retention amounts and the amounts of coverage. The
Insurance Policies described as being material on Schedule 3.25 and currently in
effect are in full force and effect and are valid, outstanding and enforceable,
and all premiums due thereon have been paid. Except as set forth on Schedule
3.25, no insurance claims of more than Fifty Thousand Dollars ($50,000) have
been made and are currently outstanding and unsettled.
3.26. Tax Matters.
(a) Except as set forth on Schedule 3.26,
Seller and each Entertainment Company (i) have accurately prepared and timely
filed or caused to be filed with the appropriate Tax authorities all material
Tax Returns required to have been filed by them under applicable law, and (ii)
have paid or caused to be paid to the appropriate Tax authorities all material
Taxes required to have been paid by them. No Tax liens or assessments have been
filed by any Tax authority against the Entertainment Companies or any of their
properties or assets.
(b) The Entertainment Companies are not and have
not been required to be included in any state, local or foreign combined,
unitary or consolidated Tax Return filed by Seller or any of Seller's
Subsidiaries (other than the Entertainment Companies)
3.27. SEC Documents. Seller has made available to Buyer a true
and complete copy of each form, report, schedule, registration statement and
definitive proxy statement filed by Seller with the SEC since January 1, 1995
(as such documents have since the time of their filing been amended or
supplemented, the "SEC Documents"), which constitute all of the documents (other
than preliminary material) that Seller was required to file with the SEC since
such date.
3.28. Disclosure. The Statement of Assumptions, taken as a
whole, does not contain an untrue statement of a material fact. None of (x) this
Agreement and the schedules (other than the Statement of Assumptions) delivered
pursuant hereto or certificates or other
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documents delivered to Buyer by or on behalf of Seller or any Entertainment
Company pursuant hereto, (y) any of the SEC Documents or (z) any other document
or written statement or other written information which has been, or at any time
prior to the Closing Date will be, provided to Buyer by or on behalf of Seller
or any Entertainment Company in connection with this Agreement or the
transactions contemplated hereby (taken as a whole, with respect to such
documents, statements or other information relating to the same subject matter)
contains or will contain an untrue statement of a material fact or omits or will
omit any information or statement of a material fact necessary in order to make
the information or statements herein or therein not misleading. After reasonable
investigation, including, without limitation, consultation with the appropriate
directors, officers and employees of Seller and the Entertainment Companies,
there is no fact or condition within the knowledge of Seller which materially
and adversely affects the assets, liabilities, business, operations or financial
condition of the Entertainment Companies, taken as a whole, which has not been
set forth in this Agreement or any schedule hereto or certificate or other
document delivered in accordance with the terms hereof or any other written
statement or other document delivered to Buyer by or on behalf of Seller or any
Entertainment Company.
3.29. Financial Statements of Landmark.
(a) Schedule 3.29(a) sets forth true and
complete copies of the unaudited balance sheet and related statement of
operations for Landmark for the year ended December 31, 1996 and the three-month
period ended March 31, 1997 (the "Landmark Financial Statements"). The Landmark
Financial Statements have been prepared based on the books and records of
Landmark in accordance with GAAP and its normal accounting practices, consistent
with past practice, and present fairly the financial condition and results of
operations of Landmark as of the date and for the periods indicated, subject to
normal year-end adjustments.
(b) Since December 31, 1996, no Entertainment
Company has transferred any asset or property to Landmark (whether in payment of
indebtedness, as a contribution to capital or otherwise) except for (i)
transfers of cash to Landmark in the ordinary course of business in an aggregate
amount (net of cash returned to the Entertainment Companies) not exceeding
$_____________ and (ii) transfer of those assets identified in Schedule 3.29(b).
3.30. No Contract With Landmark. Except as set forth on
Schedule 3.30, none of the Entertainment Companies is a party to or is bound by
any Contract with Landmark other than exhibition contracts with Orion negotiated
on an arms-length film-by-film basis relating to Films the theatrical
distribution rights to which are owned or controlled by Orion.
3.31. Board Recommendations. By the unanimous vote of the
directors present at a meeting of Seller's Board of Directors (which meeting was
duly called and held and at which a quorum was present), the Board of Directors
of Seller (a) duly and validly approved this Agreement and the transactions
contemplated hereby, and (b) resolved to recommend approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of
Seller. Seller's financial advisor, ▇▇▇▇▇▇▇▇▇, Lufkin & Jennrette Securities
Corporation, has delivered to Seller's Board of Directors an oral opinion on the
date hereof (and has committed to deliver a written opinion not later than ten
(10) days after the date hereof) to the effect that on such date, the Purchase
Price is fair to Seller's stockholders from a financial point of view.
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3.32. Bankruptcy.
(a) On or about November 5, 1992, all property
of the bankruptcy estate of each Entertainment Company that was a debtor in the
Bankruptcy Cases revested in such Entertainment Company.
(b) The use, sale or lease of property of each
Entertainment Company, whether or not such use, sale or lease is in the ordinary
course of its business and consistent with past practice, does not require any
notice to or approval of the Bankruptcy Court, the United States Trustee or any
committee of creditors or other representative of creditors appointed in the
Bankruptcy Cases or pursuant to the Confirmation Documents.
(c) Except for the claims set forth on
Schedule 3.32(b), all claims of the creditors of each Entertainment Company that
arose prior to the effective date of the Plan of Reorganization (as defined
therein) have been paid in full or otherwise fully satisfied in accordance with
the terms of the Confirmation Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer hereby represents and
warrants to Seller that:
4.01. Corporate Existence and Power. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate power to carry out its business as now
conducted. Buyer is duly qualified to do business as a foreign corporation in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where the failure to
be so qualified has not been, and may not reasonably be expected to be,
material.
4.02. Corporate Authorization. The execution, delivery and
performance by Buyer of this Agreement and the consummation by Buyer of the
transactions contemplated hereby are within its corporate powers and have been
duly authorized by all necessary corporate action on its part. This Agreement
has been duly and validly executed by Buyer and constitutes the legal, valid and
binding agreement thereof, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.
4.03. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement require no action by, consent or approval
of, or filing with, any Governmental Authority other than (i) compliance with
any applicable requirements of the HSR Act or (ii) any actions, consents,
approvals or filings otherwise expressly referred to in this Agreement.
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4.04. Non-Contravention. The execution, delivery and
performance by Buyer of this Agreement, and consummation of the transactions
contemplated hereby, do not and will not (a) contravene or conflict with the
articles or certificate of incorporation or bylaws of Buyer, true and correct
copies of all of which have been delivered to Seller by Buyer; (b) contravene or
conflict with or constitute a violation of any provision of any material
Applicable Law binding upon or applicable to Buyer; (c) constitute a default
under any material contract, agreement or understanding to which Buyer is a
party or any material authorization, license or permit of any Governmental
Authority; or (d) result in the creation or imposition of any Lien on the assets
of Buyer.
4.05. Advisory Fees. Except for ▇.▇. ▇▇▇▇▇▇ & Co., Inc.
(whose fees and expenses will be paid by Buyer), there is no investment banker,
broker, finder or other intermediary or advisor that has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee,
commission or reimbursement of expenses from Seller or any of their respective
Affiliates or Associates upon consummation of the transactions contemplated by
this Agreement.
4.06. Litigation. There is no Proceeding pending against, or
to the knowledge of Buyer, threatened against or affecting, Buyer before any
court or arbitrators or any governmental body, agency or official that in any
matter challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
4.07. Purchase for Investment. Buyer will acquire the Shares
solely for its own account for investment and not with a view toward any resale
or distribution thereof. Buyer agrees that the Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act of 1993, as amended, except
pursuant to an exemption from such registration available under such Act, and
without compliance with foreign securities laws, in each case, to the extent
applicable. Buyer has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its purchase of
the Shares. Buyer confirms that Seller has made available to Buyer the
opportunity to ask questions of the officers and management employees of the
Entertainment Companies and to acquire additional information about the business
and financial condition of the Entertainment Companies.
4.08 Ownership of MGM. Buyer owns all of the issued and
outstanding capital stock of Metro-▇▇▇▇▇▇▇-▇▇▇▇▇ Inc., a Delaware corporation.
ARTICLE V
COVENANTS OF SELLER AND ORION
Each of Seller and Orion hereby agree that:
5.01. Conduct of the Business. From the date hereof until the
Closing Date, it shall cause each Entertainment Company to conduct its business
operations in the ordinary course
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of business consistent with past practice. Without limiting the generality of
this Section 5.01, from the date hereof until the Closing Date:
(a) Seller and Orion, as applicable, will:
(i) (A) cause each Entertainment Company to
maintain its assets in the ordinary course of business consistent with
past practice in good operating order and condition, reasonable wear
and tear, damage by fire and other casualty excepted, other than
through the transfer of all of the issued and outstanding capital stock
of Landmark to an Affiliate of Seller that is not an Entertainment
Company, (B) promptly repair, restore or replace assets in the ordinary
course of business consistent with past practice, and (C) upon any
damage, destruction or loss to any of its assets, apply any and all
insurance proceeds received with respect thereto to the prompt repair,
replacement and restoration thereof to the condition of its assets
before such event;
(ii) cause each of the Entertainment
Companies to comply with all Applicable Laws;
(iii) file all foreign, Federal, state and
local Tax Returns required to be filed and make timely payment of all
applicable Taxes when due;
(iv) use reasonable commercial efforts to
obtain, prior to the Closing Date, all Required Consents;
(v) cause each of the Entertainment
Companies to take all reasonable actions necessary to be in compliance
with, and to maintain the effectiveness of, all material Permits;
(vi) promptly notify Buyer in writing of
any action, event, condition or circumstance, or group of actions,
events, conditions or circumstances, that results in, or could
reasonably be expected to result in, a Material Adverse Effect, other
than changes in general economic conditions;
(vii) promptly notify Buyer in writing of the
commencement of any Proceeding by or against Seller or any
Entertainment Company, or Seller becoming aware of any threat, claim,
action, suit, inquiry, proceeding, notice of violation, demand letter,
subpoena, government audit or disallowance that could reasonably be
expected to result in such a Proceeding;
(viii) promptly notify Buyer in writing of the
occurrence of any breach by Seller of any representation or warranty,
or any covenant or agreement, contained in this Agreement; and
(ix) continue to make expenditures as
required by and in accordance with the budget for each Film In Progress
including, without limitation, all such expenditures required for
prints and advertising ("P&A"), as contained in Schedule 5.01(a)(ix).
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(b) without Buyer's prior written consent,
Seller and Orion will not permit any Entertainment Company to:
(i) purchase or otherwise acquire assets
from any other Person other than in the ordinary course of business
consistent with past practice;
(ii) sell, assign, lease, license, transfer
or otherwise dispose of, or mortgage, pledge or encumber any of its
assets other than in the ordinary course of business consistent with
past practice or pursuant to existing obligations of Seller as set
forth in Schedule 3.10(a);
(iii) make or commit to make any expenditures
of amounts in excess of the amounts set forth on Schedule 5.01(a)(ix)
with respect to each Film In Progress including the budgeted
expenditures for P&A; provided, however, that the amount expended for
P&A may be increased above that budgeted in the event Buyer provides
all of such excess amounts.
(iv) enter any agreement or arrangement that
requires or allows payment, acceleration of payment or incurrence of
Liabilities, or the rendering of services by any Entertainment Company
outside the ordinary course of business or unless expressly
contemplated by the terms of this Agreement;
(v) enter into, amend or modify in any
material respect or terminate any Scheduled Contract or any other
Contract entered into by any Entertainment Company after the date
hereof which, if in existence on the date hereof, would be required to
be set forth in Schedule 3.14(a) as a Scheduled Contract (each, a
"Subsequent Material Contract");
(vi) except in the ordinary course of
business, waive, cancel or take any other action materially impairing
any of its rights;
(vii) make or commit to make any capital
expenditure (other than capital expenditures expressly required under
any Scheduled Contract) if, after giving effect thereto, the aggregate
of capital expenditures made or committed to be made after the date of
this Agreement would exceed Two Hundred Fifty Thousand Dollars
($250,000).
(viii) enter into or commit or propose to enter
into any Subsequent Material Contract;
(ix) (A) create, incur, assume, or guarantee
any indebtedness for borrowed money other than drawdowns under the
Existing Credit Facility or the Union Bank Loan or (B) incur any
Liability relating to a documentary or standby letter of credit, other
than in each such case referred to in this clause (ix) in the ordinary
course of business where the aggregate dollar amount of all of the
foregoing by the Entertainment Companies does not exceed Fifty Thousand
Dollars ($50,000);
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(x) (A) increase the rate or terms of
compensation payable or to become payable to its directors, officers or
employees except in the ordinary course of business consistent with
past practice, (B) pay or agree to pay any pension, retirement
allowance or other employee benefit not provided for by any Employee
Benefit Plan, Benefit Arrangement or Employment Agreement set forth in
the Schedules hereto, (C) commit itself to any additional pension,
profit sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance,
severance pay, continuation pay, termination pay, retirement or other
employee benefit plan, agreement or arrangement, or increase the rate
or terms of any Employee Benefit Plan or Benefit Arrangement, (D) enter
into any employment agreement with or for the benefit of any Person, or
(E) increase the rate of compensation under or otherwise change the
terms of any Employment Agreement identified in Schedule 3.17(a);
(xi) make any change in its accounting
methods or in the manner of keeping its books and records or any change
in its current practices with respect to inventory, sales, receivables,
payables or accrued expenses, except as required by GAAP;
(xii) declare or pay any dividend or make any
distribution in respect of any of its capital stock, options, warrants,
rights of first refusal or other rights to purchase capital stock of
any Entertainment Company or, directly or indirectly, redeem, purchase
or otherwise acquire any of its Equity Securities or the Equity
Securities of any of its Affiliates or make any other payments of any
kind to the holders of any of its Equity Securities in respect thereof
or to the holders of any Equity Securities of any of its Affiliates in
respect thereof, or enter into any commitment agreement to do any of
the foregoing other than the dividend or distribution of the capital
stock of Landmark;
(xiii) amend its charter or Bylaws;
(xiv) organize any new Subsidiary or acquire
any capital stock or other equity securities or ownership interest of
any corporation or business entity;
(xv) pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction for fair and
equivalent value in the ordinary course of business consistent with
past practice of liabilities or obligations reflected or reserved
against in the 1996 Balance Sheet or incurred in the ordinary course of
business since the date of the 1996 Balance Sheet;
(xvi) (A) pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, contingent or
otherwise) owed to any Person by Seller or any of its Affiliates (other
than any Entertainment Company) or owed to Seller or any of its
Affiliates (other than any Entertainment Company) by any Entertainment
Company or (B) prepay any Debt (other than payments of revolving loans
made under the Existing Orion Credit Facility);
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(xvii) write down the value of any inventory
or write-off as uncollectible any notes or accounts receivable, except
for write-downs and write-offs in accordance with GAAP and in the
ordinary course of business consistent with past practice, none of
which are material to the Entertainment Companies, taken as a whole;
(xviii) dispose of or permit to lapse any rights
to the use of any Intellectual Property Rights or dispose of or
disclose any Intellectual Property Rights not a matter of public
knowledge in the ordinary course of business consistent with past
practice and which are not material to the business of the
Entertainment Companies; or
(xix) merge or consolidate with any other
corporation, acquire control of all or substantially all of the assets
of any other corporation or business entity, or take any steps incident
to, or in furtherance of, any of such actions, whether by entering into
an agreement or otherwise.
5.02. Access to Information. Subject to compliance with
Applicable Laws, from the date of this Agreement until Closing, Seller and Orion
will promptly: (a) give Buyer and its counsel, financial advisors, auditors and
other authorized representatives reasonable access to the offices, properties,
books and records of each Entertainment Company upon reasonable prior notice in
order to conduct its due diligence investigation of the Entertainment Companies,
(b) furnish to Buyer, its counsel, financial advisors, auditors and other
authorized representatives such information relating to the Entertainment
Companies as Buyer may reasonably request in order to conduct its due diligence
investigation of the Entertainment Companies, and (c) instruct the directors,
officers, employees, counsel, auditors and financial advisors of each
Entertainment Company to cooperate with Buyer and its counsel, financial
advisors, auditors and other authorized representatives in their due diligence
investigation of the Entertainment Companies and their preparation of all
necessary certificates or similar documents required to be prepared and
delivered by Buyer to Seller pursuant to this Agreement.
5.03. Compliance with Terms of Required Governmental Approvals
and Required Contractual Consents. On and after the Closing Date, Seller shall
comply at its own expense with all conditions and requirements set forth in (i)
all Required Governmental Approvals as necessary to keep the same in full force
and effect assuming continued compliance with the terms thereof by Buyer and
(ii) all Required Contractual Consents as necessary to keep the same effective
and enforceable against the Persons giving such Required Contractual Consents
assuming continued compliance with the terms thereof by Buyer.
5.04. Maintenance of Insurance Policies. On and after the date
hereof (including after the Closing Date), neither Seller nor Orion shall take
or fail to take or permit any Entertainment Company to fail to take any action
if such action or inaction, as the case may be, would adversely affect the
applicability of any insurance in effect on the date hereof that covers all or
any part of the assets of any Entertainment Company. Notwithstanding the
foregoing, Seller shall not have any obligation to make any monetary payment to
maintain the effectiveness of any such insurance policy after the Closing Date.
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5.05. Confidentiality.
(a) Seller and Orion will, and will cause their
representatives to, treat any data and information obtained with respect to
Buyer or any of its Affiliates from any representative, officer, director, or
employee of Buyer, or from any books or records of Buyer in connection with this
Agreement, confidentially and with commercially reasonable care and discretion,
and will not disclose any such information to third parties; provided, however,
that the foregoing shall not apply to (i) information in the public domain or
that becomes public through disclosure by any party other than Seller or any
Affiliate or representative of Seller or any such Affiliate, so long as such
other party is not in breach of a confidentiality obligation, (ii) information
that may be required to be disclosed by Applicable Law or (iii) information
required to be disclosed to obtain any Required Consents.
(b) In the event that the Closing fails to take
place and this Agreement is terminated, Seller and Orion, upon the written
request of Buyer, will, and will cause their respective representatives to,
promptly deliver to Buyer any and all documents or other materials furnished by
Buyer or any of its Affiliates to Seller or Orion in connection with this
Agreement without retaining any copy thereof. In the event of such request, all
other documents, whether analyses, compilations or studies, that contain or
otherwise reflect the information furnished by Buyer to Seller or Orion, shall
be destroyed by Seller or Orion or shall be returned to Buyer, and Seller or
Orion, as the case may be, shall confirm to Buyer in writing that all such
materials have been returned or destroyed. No failure or delay by Buyer in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
(c) From and after the Closing, Seller will, and
will cause its Subsidiaries and the representatives of Seller and its
Subsidiaries to, treat any data and information obtained with respect to any
Entertainment Company from any representative, officer, director, or employee of
Seller or any Entertainment Company, or from any books or records of Seller or
any Entertainment Company (whether or not obtained in connection with this
Agreement) confidentially and with commercially reasonable care and discretion,
and will not disclose any such information to third parties; provided, however,
that the foregoing shall not apply to (i) information in the public domain or
that becomes public through disclosure by any party other than Seller or any
Affiliate of Seller or representative of Seller or any such Affiliate, so long
as such other party is not in breach of a confidentiality obligation, (ii)
information that may be required to be disclosed by the rules of the American
Stock Exchange, Inc. or Applicable Law, or (iii) information required to be
disclosed to obtain any Required Consents. To the extent permitted by the terms
of any confidentiality agreements to which Seller or any of its Affiliates
(other than any Entertainment Company) is a party relating to any of the
Entertainment Companies or their respective businesses, Seller will assign to
Buyer at Closing all right, title and interest of Seller under such
confidentiality agreements. To the extent that Seller or any such Affiliate is
prohibited from assigning any of its right, title and interest under any such
confidentiality agreement by the terms thereof, Seller or such Affiliate shall
use its reasonable commercial efforts to enforce its rights and remedies
thereunder, and Buyer agrees to advance Seller or such Affiliate for all actual
out-of-pocket expenses incurred in connection with or arising
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out of such enforcement (including, without limitation, reasonable attorneys'
fees and costs), if Buyer shall provide Seller with an indemnification agreement
reasonably acceptable to Seller that indemnifies Seller from and against all
counterclaims asserted or other losses incurred by Seller as a result of such
attempted enforcement of rights or assertion of remedies thereunder.
5.06. Specific Performance. The parties hereto recognize and
agree that in the event of a breach by Seller or Orion of this Article V, money
damages would not be an adequate remedy to Buyer or its Affiliates for such
breach and, even if money damages were adequate, it would be impossible to
ascertain or measure with any degree of accuracy the damages sustained by Buyer
or its Affiliates therefrom. Accordingly, if there should be a breach or
threatened breach by Seller or Orion of provisions of this Article V, Buyer and
its Affiliates shall be entitled to an injunction restraining Seller and Orion
from any breach without showing or proving actual damage sustained by Buyer or
its Affiliates, as the case may be. Nothing in the preceding sentence shall
limit or otherwise affect any remedies that Buyer may otherwise have under
Applicable Law.
5.07 Bankrupcy Cases. Between the date hereof and the Closing
Date, Seller and Orion shall use commercially reasonable efforts to have the
Bankruptcy Cases closed in conformity with Applicable Law (it being understood
that this covenant shall not be a condition to Closing).
5.08. No Solicitations. From and after the date hereof,
Seller, without the prior written consent of Buyer, will not, and will not
authorize any of its or any of its Subsidiaries' officers, employees, directors,
stockholders or other representatives to, directly or indirectly, solicit,
initiate or encourage (including by way of furnishing information) or take any
other action to facilitate knowingly any inquiries or the making of any proposal
that constitutes or could be reasonably expected to lead to an Alternative
Proposal from any Person, or engage in any discussions or negotiations relating
thereto or accept any Alternative Proposal or make or authorize any statement,
recommendation or solicitation in support of any Alternative Proposal; provided,
however, that notwithstanding any other provision hereof, Seller may (a) at any
time prior to the ▇▇▇▇ ▇▇▇▇▇▇'▇ stockholders shall have voted to approve this
Agreement and the transactions contemplated hereby, engage in discussions or
negotiations with a third party who (without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or with
Seller or any of its Subsidiaries or any officer, employee, director,
stockholder or other representative of Seller or any of its Subsidiaries after
the date hereof) seeks to initiate such discussions or negotiations and may
furnish such third party information concerning the Entertainment Companies if,
and only to the extent that, (i) (x) such third party has first made, after the
date hereof, an Alternative Proposal in writing the terms of which reflect a
superior transaction than the transactions contemplated by this Agreement and
has demonstrated that the funds necessary for the Alternative Proposal are
reasonably likely to be available (as determined in good faith in each case by
Seller's Board of Directors after consultation with its financial advisors) and
(y) Seller's Board of Directors shall have determined in good faith, on the
basis of advice of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other outside
counsel of similar stature, that such action is necessary for the Board of
Directors to comply with its fiduciary duties to stockholders under Applicable
Law and (ii) prior to furnishing information to or entering into discussions or
negotiations with such Person, Seller receives from such Person an executed
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confidentiality agreement in reasonably customary form and containing terms not
in the aggregate materially more favorable to such Person than the terms
contained in Section 6.02 or in any confidentiality agreement previously
executed by Seller and Buyer or any of its Subsidiaries; or (b) comply with Rule
14e-2 promulgated under the Securities and Exchange Act of 1934 with regard to a
tender or exchange offer. Seller shall immediately cease and terminate any
existing solicitation, initiation, engagement, activity, discussion or
negotiation with any Persons conducted heretofore by Seller or any officer,
employee, director, stockholder or other representative of Seller or any of its
Subsidiaries with respect to the foregoing. Seller shall not release any third
party from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another Person who has
made, or who may reasonably be considered likely to make, an Alternative
Proposal, unless its Board of Directors shall determine in good faith, on the
basis of the advice of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other outside
counsel of similar stature, that such action is necessary for the Board of
Directors to comply with its fiduciary duties to stockholders under Applicable
Law. Seller shall notify Buyer orally and in writing of any such inquiries (that
are or appear to be serious or legitimate), offers or proposals (including the
terms and conditions of any such offer or proposal, the identity of the Person
making it and a copy of any written Alternative Proposal), as promptly as
practicable and in any event within forty-eight (48) hours after the receipt
thereof, shall keep Buyer informed of the status and details of any such
inquiry, offer or proposal, and shall give Buyer five (5) days' advance written
notice of any agreement to be entered into with, or any information to be
supplied to, any Person making such inquiry, offer or proposal.
5.09. Transfer of Assets. Between the date hereof and the
Closing Date, neither Orion nor any other Entertainment Company will transfer to
Landmark any assets of Orion or any other Entertainment Company other than (a)
transfers of cash to Landmark in the ordinary course of business consistent with
past practice in an aggregate amount (net of cash returned to the Entertainment
Companies) not exceeding $________ and (b) transfer of those assets identified
in Schedule 3.29(b). Immediately prior to the Closing, Seller and Orion will
cause (i) Landmark to offset against any amounts owing by Landmark to any
Entertainment Company any amounts owed by Landmark to such Entertainment Company
(other than Film rentals payable by Landmark with respect to the theatrical
exhibition of Films ("Film Rentals"), and (ii) any balance owed to Landmark by
any Entertainment Company shall be forgiven and any balance owed by Landmark to
any Entertainment Company shall be contributed to the capital of Landmark. Since
December 31, 1996, Landmark has paid, and between the date hereof and the
Closing Date Landmark will pay, Film Rentals only in the ordinary course of
business consistent with past practice.
5.10 Use of Trade Names. From and after the Closing, neither
Seller nor any Affiliate of Seller shall use the tradename of any Entertainment
Company in the conduct of Seller's or such Affiliate's business without Buyer's
prior written consent.
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ARTICLE VI
COVENANTS OF BUYER
6.01. Compliance with Terms of Required Governmental
Approvals and Required Contractual Consents. On and after the Closing Date,
Buyer shall comply at its own expense with all conditions and requirements set
forth in (i) all Required Governmental Approvals as necessary to keep the same
in full force and effect assuming continued compliance with the terms thereof by
Seller and (ii) all Required Contractual Consents as necessary to keep the same
effective and enforceable against the Persons giving such Required Contractual
Consents assuming continued compliance with the terms thereof by Seller.
6.02. Confidentiality.
(a) Buyer will, and will cause its
representatives to, treat any data and information obtained with respect to
Seller from any representative, officer, director or employee of Seller, or from
any books or records of Seller in connection with this Agreement, confidentially
and with commercially reasonable care and discretion, and will not disclose any
such information to third parties; provided, however, that the foregoing shall
not apply to (i) information in the public domain or that becomes public through
disclosure by any party other than Buyer, or its Affiliates or representatives,
so long as such other party is not in breach of a confidentiality obligation,
(ii) information that may be required to be disclosed by Applicable Law, (iii)
information required to be disclosed to obtain any Required Consents, or (iv)
any information that is disclosed by Buyer or its Affiliates to any of their
actual or prospective lenders or investors in connection with financing the
transactions contemplated by this Agreement.
(b) In the event that the Closing fails to take
place and this Agreement is terminated, Buyer, upon the written request of
Seller, will, and will cause its representatives to, promptly deliver to Seller
any and all documents or other materials furnished by Seller to Buyer in
connection with this Agreement without retaining any copy thereof and without
using any confidential information of Seller to solicit any customers of Seller.
In the event of such request, all other documents, whether analyses,
compilations or studies, that contain or otherwise reflect the information
furnished by Seller to Buyer, shall be destroyed by Buyer or shall be returned
to Seller, and Buyer shall confirm to Seller in writing that all such materials
have been returned or destroyed. No failure or delay by Seller in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
6.03. Specific Performance. The parties hereto recognize
and agree that in the event of a breach by Buyer of this Article VI, money
damages would not be an adequate remedy to Seller for such breach and, even if
money damages were adequate, it would be impossible to ascertain or measure with
any degree of accuracy the damages sustained by Seller therefrom. Accordingly,
if there should be a breach or threatened breach by Buyer of provisions of this
Article VI, Seller shall be entitled to an injunction restraining Buyer from any
breach without showing or proving actual damage sustained by Seller. Nothing in
the preceding sentence shall limit or otherwise affect any remedies that Seller
may otherwise have under Applicable Law.
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6.04. Use of Metromedia Name. Neither Buyer nor any
Affiliate of Buyer shall use the "Metromedia" tradename in the conduct of its
business after the Closing without Seller's prior written consent.
6.05 Bank Waivers. Buyer shall use reasonably commercial
efforts to obtain the requisite consents of the lenders under the MGM Credit
Facility.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01. Further Assurances. Subject to the terms and
conditions of this Agreement, each party will use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or reasonably desirable under Applicable Law to consummate the
transactions contemplated by this Agreement. Buyer and Seller agree to execute
and deliver such other documents, certificates, agreements and other writings
and to take such other actions as may be reasonably necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.
7.02. Certain Filings. The parties hereto shall cooperate
with one another in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required or reasonably appropriate,
or any action, consent, approval or waiver from any party to any Contract is
required or reasonably appropriate, in connection with the consummation of the
transactions contemplated by this Agreement. Subject to the terms and conditions
of this Agreement, in taking such actions or making any such filings, the
parties hereto shall furnish information required in connection therewith and
seek timely to obtain any such actions, consents, approvals or waivers. Without
limiting the foregoing, the parties hereto shall each promptly complete and file
all reports and forms, and respond to all requests or further requests for
additional information, if any, as may be required or authorized under the HSR
Act.
7.03. Public Announcements. Up to (and including) the
Closing Date, each party agrees that, without the consent of the other party, it
will not, except as may be required by the rules of the American Stock Exchange
or Applicable Law, issue any press release or make any public statement with
respect to this Agreement or the transactions contemplated hereby. For a period
of ten (10) days after the Closing Date, the parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby, and, except
as may be required by the rules of the American Stock Exchange or Applicable
Law, will not issue any such press release or public statement prior to such
consultation. Neither Seller nor any officer, employee, director, stockholder or
other representative shall, at any time from and after the Closing, issue any
press release or make any public statement that is critical, disparaging or
otherwise could reasonably be interpreted as being negative with respect to any
of the Entertainment Companies or their respective businesses or financial
condition or officers, employees or directors.
7.04. Administration of Accounts. All payments and
reimbursements made in the ordinary course by any third party in the name of or
to Seller or any Affiliate thereof in
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connection with or arising out of the business of any Entertainment Company
shall be held by Seller or such Affiliate in trust for the benefit of the
relevant Entertainment Company and, immediately upon receipt by Seller or such
Affiliate of any such payment or reimbursement, Seller shall pay, or cause to be
paid, over to the relevant Entertainment Company the amount of such payment or
reimbursement without right of set off.
7.05. Specific Performance. The parties hereto recognize
and agree that in the event of a breach by one party hereto of this Article VII,
money damages would not be an adequate remedy to the other party for such breach
and, even if money damages were adequate, it would be impossible to ascertain or
measure with any degree of accuracy the damages sustained by the non-breaching
party therefrom. Accordingly, if there should be a breach or threatened breach
by one party of provisions of this Article VI, the non-breaching party shall be
entitled to an injunction restraining the breaching party from any breach
without showing or proving actual damage sustained by the non-breaching party.
7.06. Right of First Negotiation. For a period of five
(5) years following consummation of the Closing, Buyer will afford Seller a
right of first negotiation to obtain the right to distribute by wired or
wireless cable, in the territories noted on Schedule 7.06, all Films owned by
Buyer or any of its Subsidiaries, all Library Films and all Films hereafter
produced by Buyer or any of its Subsidiaries, including without limitation, the
Entertainment Companies, to the extent Buyer owns such rights in the territories
specified and subject to any existing licenses or other agreements to which
Buyer or any of its Subsidiaries is a party or by which Buyer or any of its
Subsidiaries is bound. In the event Buyer elects to dispose of any rights
covered by the first negotiation described herein to any third party, Buyer and
Seller shall negotiate in good faith for a period of fifteen (15) days following
written notice by Buyer to Seller of its desire to dispose of such rights for
the purposes of agreeing upon the terms under which said rights may be conveyed
to Seller. In the event the parties are unable to agree on terms within said
fifteen (15) day period, Buyer shall be free to dispose of said rights without
any further obligation of any kind to Seller.
7.07. Proxy Consent Solicitation.
(a) In connection with any proxy statement or
consent solicitation that may be distributed to stockholders of Seller with
respect to the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, Buyer will furnish to Seller in writing
such information and documents concerning Buyer and its Subsidiaries as Seller
reasonably requests for use in connection with any such proxy statement or
consent solicitation and, to the extent permitted by law, will indemnify and
hold harmless Seller, its directors and officers and each other Person who
controls Seller (within the meaning of the Securities Act of 1933 (the
"Securities Act")) against any losses, claims, damages, liabilities, joint or
several, to which Seller or any such director or officer or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
any untrue statement of a material fact contained in the proxy statement or
consent solicitation or any amendment thereof or supplement thereto or (ii) any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is made in such proxy statement or consent
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solicitation or any amendment or supplement thereto in reliance upon and in
conformity with written information concerning Buyer or any of its Affiliates
prepared and furnished to Seller by Buyer expressly for use therein, and Buyer
will reimburse Seller and each such director, officer and controlling person for
any legal or any other expenses incurred by them in connection with defending
any such loss, claim, liability, action or proceeding.
(b) To the extent permitted by law, Seller will
indemnify and hold harmless Buyer, its directors and officers and each other
Person who controls Buyer (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities, joint or several, to which Buyer or any
such director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue statement of a
material fact contained in the proxy statement or consent solicitation or any
amendment thereof or supplement thereto or (ii) any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is not
made in such proxy statement or consent solicitation or any amendment or
supplement thereto in reliance upon and in conformity with written information
concerning Buyer or any of its Affiliates prepared and furnished to Seller by
Buyer expressly for use therein, and Seller will reimburse Buyer and each such
director, officer and controlling person for any legal or any other expenses
incurred by them in connection with defending any such loss, claim, liability,
action or proceeding.
7.08. Refinancing of Debt.
(a) Concurrent with the Closing, Seller will
(i) offset against any amounts owing to Seller or any Affiliate of Seller (other
than any Entertainment Company) from any Entertainment Company all payables owed
from Seller or any Affiliate of Seller (other than any Entertainment Company) to
such Entertainment Company on the Closing Date and (ii) if following the offset
provided for in (i), (A) there are any remaining amounts owing to Seller or any
Affiliate of Seller (other than any Entertainment Company) by any Entertainment
Company, contribute all such amounts to the capital of such Entertainment
Company, or (B) there are any remaining amounts owing to any Entertainment
Company, pay all such amounts.
(b) Seller and Orion shall cooperate with Buyer,
between the date hereof and the Closing Date, in order to assist Buyer in
arranging for the New Orion Credit Facility to be executed and become effective
concurrent with the Closing, such that funds may be drawn thereunder to be
utilized, along with other funds to be made available to Orion by Buyer
concurrent with the Closing, to satisfy all of Orion's obligations under the
Existing Orion Credit Facility. Buyer covenants to deliver to Orion concurrent
with the Closing an amount of cash such that such cash, together with funds
available at such time under the New Orion Credit Facility, will be sufficient
to permit Orion to satisfy all its obligations under the Existing Orion Credit
Facility and cause Seller and its Affiliates to be released of all obligations
thereunder.
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ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions to Obligation of Buyer. The obligations
of Buyer to consummate the Closing are subject to the satisfaction on or prior
to the Closing Date of each of the following conditions:
(a) (i) Each of Seller and Orion shall have
performed and satisfied each of its obligations hereunder required to be
performed and satisfied by it on or prior to the Closing Date, (ii) each of the
representations and warranties of Seller contained in this Agreement shall be
true and correct, at and as of the Closing Date with the same force and effect
as if made as of the Closing Date (except for representations and warranties
made as of a specific date (other than the date of this Agreement) shall
continue to be true and correct in all material respects as of such specific
date), except for any breach of any such representations or warranties which,
when combined with all other breaches of such representations and warranties,
could not be reasonably expected to result in a Material Adverse Effect, and
(iii) Buyer shall have received certificates signed by a duly authorized
executive officer of Seller to the foregoing effect and to the effect that, to
the knowledge of such executive officer, the conditions specified in this
Section 8.01 have been satisfied.
(b) All Required Governmental Approvals and
Essential Consents shall have been obtained without the imposition of any
conditions that are or would become applicable to any Entertainment Company or
Buyer (or any of its Affiliates) after the Closing that Buyer in good faith
determines would be materially burdensome upon the Entertainment Companies taken
as a whole or Buyer (or any of its Affiliates) or the businesses of the
Entertainment Companies taken as a whole and Buyer substantially as such
businesses have been conducted prior to the Closing Date or as said businesses,
as of the date hereof, would be reasonably expected to be conducted after the
Closing Date. All such Required Governmental Approvals and Essential Consents
shall be in effect. All conditions and requirements prescribed by any Required
Governmental Approval and Essential Consent (or any such other consent) to be
satisfied on or prior to the Closing Date shall have been satisfied allowing all
such Required Governmental Approvals and Essential Consents (and all such other
consents) to be effective and enforceable, and to remain effective and
enforceable against the Persons giving such Required Governmental Approvals and
Essential Consents (and such other consents) assuming continued compliance with
the terms thereof.
(c) The transactions contemplated by this
Agreement and the consummation of the Closing shall not violate any Applicable
Law. No temporary restraining order, preliminary or permanent injunction, cease
and desist order or other order issued by any court of competent jurisdiction or
any competent Governmental Authority or any other legal restraint or prohibition
preventing the transfer and exchange contemplated hereby or the consummation of
the Closing, or imposing Damages in respect thereto, shall be in effect, and
there shall be no pending or threatened actions or proceedings (i) by any
Governmental Authority (or determinations by any Governmental Authority)
challenging or in any manner seeking to restrict or prohibit the transactions
contemplated hereby or the consummation of the Closing,
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(ii) or by any Governmental Authority (or determinations by any Governmental
Authority) or by any other person or to impose conditions that Buyer reasonably
determines would be materially burdensome upon the Entertainment Companies taken
as a whole, the Shares or Buyer (or any of its Affiliates) or the businesses of
the Entertainment Companies taken as a whole and Buyer substantially as such
businesses have been conducted prior to the Closing Date or as said businesses,
as of the date hereof, could be reasonably expected to be conducted after the
Closing Date.
(d) Since the date hereof, there shall not have
been any change in any Entertainment Company, its assets or the Shares
(including any damage, destruction or other casualty loss, but excluding any
event, occurrence, development or state of circumstances or facts or change
resulting from changes in general economic conditions) that has had or that
could be reasonably expected to have, either alone or together with all such
events, occurrences, developments, states of circumstances or facts or changes,
a Material Adverse Effect.
(e) Buyer shall have received an opinion of
counsel from ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ in form and substance
reasonably satisfactory to Buyer.
(f) Buyer and its Subsidiaries shall have
obtained in writing all consents, approvals and waivers required to be obtained
by Buyer and its Subsidiaries by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby under the
MGM Credit Facility.
(g) All Persons who are directors of any
Entertainment Company whose principal employment is not as an officer and/or
employee of an Entertainment Company shall have resigned such directorships.
(h) Seller shall have provided to Buyer written
evidence satisfactory to Buyer of the consummation of the transfer of the
ownership of all issued and outstanding stock of Landmark to an Affiliate of
Seller that is not an Entertainment Company.
8.02. Conditions to Obligation of Seller. The
obligations of Seller to consummate the Closing are subject to the satisfaction
on or prior to the Closing Date of each of the following conditions:
(a) (i) Buyer shall have performed and satisfied
each of its obligations hereunder required to be performed and satisfied by it
on or prior to the Closing Date; (ii) the representations and warranties of
Buyer contained in this Agreement shall be true, complete and accurate in all
material respects at and as of the Closing Date, as if made at and as of the
Closing Date (except for representations and warranties made as of a specific
date (other than the date of this Agreement) shall continue to be true and
correct in all material respects as of such specific date) except for any breach
of any such representations and warranties which, when combined with all other
breaches of such representations and warranties, would not be materially adverse
to Seller and (iii) Seller shall have received a certificate signed by a duly
authorized senior officer of Buyer to the foregoing effect and to the effect
that, to such senior officer's knowledge, the conditions specified in this
Section 8.02 have been satisfied.
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(b) All Required Governmental Approvals and
Essential Consents shall have been obtained without the imposition of any
conditions that are or would become applicable to Seller (or any of its
Affiliates) after the Closing that Seller in good faith determines would be
materially burdensome upon Seller (or any of its Affiliates) or the businesses
of Seller taken as a whole and Buyer substantially as such businesses have been
conducted prior to the Closing Date or as said businesses, as of the date
hereof, would be reasonably expected to be conducted after the Closing Date. All
such Required Governmental Approvals and Essential Consents shall be in effect.
All conditions and requirements prescribed by any Required Governmental Approval
and Essential Consent (or any such other consent) to be satisfied on or prior to
the Closing Date shall have been satisfied allowing all such Required
Governmental Approvals and Essential Consents (and all such other consents) to
be effective and enforceable, and to remain effective and enforceable against
the Persons giving such Required Governmental Approvals and Essential Consents
(and such other consents) assuming continued compliance with the terms thereof.
(c) The transactions contemplated by this
Agreement and the consummation of the Closing shall not violate any Applicable
Law. No temporary restraining order, preliminary or permanent injunction, cease
and desist order or other order issued by any court of competent jurisdiction or
any competent Governmental Authority or any other legal restraint or prohibition
preventing the transfer and exchange contemplated hereby or the consummation of
the Closing, or imposing Damages in respect thereto, shall be in effect, and
there shall be no pending or threatened actions or proceedings (i) by any
Governmental Authority (or determinations by any Governmental Authority)
challenging or in any manner seeking to restrict or prohibit the transactions
contemplated hereby or the consummation of the Closing, (ii) or by any
Governmental (or determinations by any Governmental Authority) or by any other
person or to impose conditions that Seller reasonably determines would be
materially burdensome upon Seller (or any of its Affiliates) or the businesses
of Seller substantially as such businesses have been conducted prior to the
Closing Date or as said businesses, as of the date hereof, could be reasonably
expected to be conducted after the Closing Date.
(d) Seller shall have received an opinion of
counsel from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in form and substance reasonably
satisfactory to Seller.
(e) Seller shall have obtained the approval of
its stockholders required to be obtained by Seller by virtue of the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby under its Certificate of Incorporation, its Bylaws or
Applicable Law.
(f) Seller shall have been released of all
obligations as guarantor of that certain Lease pertaining to the real property
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, occupied by the
Entertainment Companies on the date hereof.
(g) Seller and its Affiliates shall have been
released from all obligations thereof in connection with the Existing Orion
Credit Facility.
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ARTICLE IX
INDEMNIFICATION
9.01. Indemnification of Buyer. From and after the Closing
Date and subject to the terms and conditions of this Section 9.01, Buyer and its
Affiliates (collectively, the "Buyer Indemnitees") shall each be indemnified and
held harmless to the extent set forth in this Article IX by Seller in respect of
any and all Damages actually incurred by any Buyer Indemnitee:
(a) as a result of any misrepresentation
in or breach of or failure to perform any representation, warranty,
covenant and/or agreement made by Seller in this Agreement; provided,
however, that Seller, with respect to Damages incurred by any Buyer
Indemnitee as a result of any such misrepresentation, breach or failure
other than those described in clauses (i) or (ii) of Section 9.03(c)
(as to which the limits described in this proviso shall not apply),
shall have no obligation under this clause (i) of Section 9.01(a)
unless and until the aggregate amount of Damages so incurred exceeds
Fifteen Million Dollars ($15,000,000), whereupon Seller shall be liable
to indemnify a Buyer Indemnitee for all such Damages in excess of such
amount up to a maximum amount equal to the Purchase Price;
(b) as a result of any violations or
infringements of any material Applicable Law, or any order, writ,
injunction or decree of any Governmental Authority, but only to the
extent that such violation or infringement occurs prior to the Closing
Date; or
(c) as a result of any liability arising out
of or in connection with the litigation described in Schedule 9.01(c)
or by or among one or more of the parties to such litigation identified
therein or arising out of the facts giving rise to the matters
described therein, and all counter-claims, cross-claims and other
actions relating thereto.
Any indemnity arising with respect to Taxes shall be governed by the provisions
of Article XI below.
9.02. Indemnification of Seller. From and after the
Closing Date, Seller and its Affiliates (collectively, the "Seller Indemnitees")
shall each be indemnified and held harmless to the extent set forth in this
Article IX by Buyer in respect of any and all Damages actually incurred by any
Seller Indemnitee (i) as a result of any misrepresentation in or breach of or
failure to perform any representation, warranty, covenant or agreement made by
Buyer in this Agreement and (ii) resulting from Buyer's operation of the
Entertainment Companies or ownership of the Shares after the Closing Date.
9.03. Survival of Representations, Warranties and
Covenants.
(a) Except as otherwise provided in this
Article IX, all representations, warranties, covenants, agreements and
obligations of each Indemnifying Party contained herein and all claims of any
Buyer Indemnitee or Seller Indemnitee in respect of any breach of any
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representation, warranty, covenant, agreement or obligation of any Indemnifying
Party contained in this Agreement, shall survive the Closing and any due
diligence examination or investigation by Buyer, regardless of when it is
conducted, and shall expire on the first anniversary of the Closing Date.
(b) Notwithstanding Section 9.03(a), each of
the representations and warranties of Seller set forth in Sections 3.20 and 3.21
shall survive the Closing Date and shall expire on the second anniversary of the
Closing Date.
(c) Notwithstanding Section 9.03(a), each of the
following representations, warranties, covenants, agreements and obligations of
Seller as Indemnifying Party shall survive the Closing Date until the expiration
of thirty (30) days following any applicable statute of limitations, including
extensions thereof: (i) any misrepresentation in or breach of any representation
or warranty made in Sections 3.01, 3.02, 3.03, 3.04, 3.17, 3.23, 3.24 or 3.26
and (ii) the breach or failure to perform by Seller after the Closing Date of
any of the covenants, agreements or obligations contained in this Agreement or
in the Exhibits attached hereto required to be performed after the Closing Date,
including those contained in Section 7.07 and Article XI.
(d) Notwithstanding Section 9.03(a), each of
the following representations, warranties, covenants, agreements and obligations
of Buyer as an Indemnifying Party shall survive the Closing Date until the
expiration of thirty (30) days following the applicable statute of limitations,
including extensions thereof: (i) any misrepresentation in or breach of any
representation or warranty made in Sections 4.01, 4.02 or 4.05 and (ii) the
breach or failure to perform by Buyer after the Closing Date of any of the
covenants, agreements or obligations of such Person contained in this Agreement
or in the Exhibits attached hereto.
9.04. Claims for Indemnification.
(a) If any Indemnitee shall believe that such
Indemnitee is entitled to indemnification pursuant to this Article IX in respect
of any Damages, such Indemnitee shall promptly give the appropriate Indemnifying
Party notice of such claim (a "Notice of Claim") (but such Notice of Claim must
be delivered within the time periods specified in Sections 9.03(a), (b) and
(c)). Any such Notice of Claim shall set forth in reasonable detail and to the
extent then known the basis for such claim for indemnification and the amount of
the claim, to the extent specified or otherwise known. The failure of such
Indemnitee to give the Notice of Claim for indemnification promptly shall not
adversely affect such Indemnitee's right to indemnity hereunder except to the
extent that the defense of any claim is prejudiced by such failure.
(b) No Person shall have any claim or cause of
action as a result of any misrepresentation in or breach of or failure to
perform any representation, warranty, covenant, agreement or obligation of any
Indemnifying Party referred to in this Article IX against any Affiliate,
stockholder, director, officer, employee, consultant or agent of such
Indemnifying Party unless any of the foregoing is a successor or assign of such
Indemnifying Party. Nothing set forth in this Article IX shall be deemed to
prohibit or limit any Buyer Indemnitee's or Seller Indemnitee's right at any
time before, on or after the Closing Date, to seek injunctive or other
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equitable relief for the failure of any Indemnifying Party to perform any
covenant or agreement contained herein.
9.05. Defense of Claims.
(a) In connection with any claim which may give
rise to indemnity under this Article IX resulting from or arising out of any
claim or Proceeding against an Indemnitee by a Person that is not a party
hereto, the Indemnifying Party may (unless such Indemnitee elects not to seek
indemnity hereunder for such claim), upon written notice to the relevant
Indemnitee, assume the defense of any such claim or Proceeding if all
Indemnifying Parties with respect to such claim or Proceeding jointly
acknowledge to the Indemnitee its right to indemnity pursuant hereto in respect
of the entirety of such claim (as such claim may have been modified through
written agreement of the parties) and provide assurances, reasonably
satisfactory to such Indemnitee, that the Indemnifying Parties will be
financially able to satisfy such claim in full if such claim or Proceeding is
decided adversely. If the Indemnifying Parties assume the defense of any such
claim or Proceeding, the Indemnifying Parties shall select counsel reasonably
acceptable to such Indemnitee to conduct the defense of such claim or
Proceeding, shall take all steps necessary in the defense or settlement thereof
and shall at all times reasonably diligently and promptly pursue the resolution
thereof. If the Indemnifying Parties shall have assumed the defense of any claim
or Proceeding in accordance with this Section 9.05, the Indemnifying Parties
shall be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, with the consent of the Indemnitee,
which consent will be not unreasonably withheld or delayed; provided, that no
such consent shall be required from such Indemnitee if the Indemnifying Parties
shall pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; provided, further, that
the Indemnifying Parties shall not be authorized to encumber any of the assets
of any Indemnitee or to agree to any restriction that would apply to any
Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, officers, employees and if named as a defendant, consultants
and agents with respect to such claim. Each Indemnitee shall be entitled to
participate in the defense of any such action at its own cost and expense. Each
Indemnitee shall, and shall cause each of its Affiliates, officers, employees,
consultants and agents to, cooperate fully with the Indemnifying Parties in the
defense of any claim or Proceeding being defended by the Indemnifying Parties
pursuant to this Section 9.05.
(b) If the Indemnifying Parties do not assume
the defense of any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 9.05(a), such Indemnitee may defend against such claim
or Proceeding in the manner as it may deem appropriate, including settling such
claim or Proceeding after giving notice of the same to the Indemnifying Parties,
on such terms as such Indemnitee may deem appropriate. If the Indemnifying
Parties seek to question the manner in which such Indemnitee defended such claim
or Proceeding or the amount of or nature of any such settlement, the
Indemnifying Parties shall have the burden to prove by a preponderance of the
evidence that such Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
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(c) Although the indemnification rights provided
in this Article IX shall extend to the respective Affiliates of Buyer and
Seller, for the purpose of the procedures set forth in this Section 9.05, any
claims for indemnification shall be made by and through Buyer or Seller, as the
case may be.
9.06. Nature of Payments. Any payment under this
Article IX shall be treated for tax purposes as an adjustment of the Purchase
Price to the extent such characterization is proper and permissible under
relevant Tax authorities, including court decisions, statutes, regulations and
administrative promulgations.
9.07 Taxes. The provisions of this Article IX shall not
be applicable to Taxes, which shall be governed by Article XI.
ARTICLE X
TERMINATION
10.01. Grounds for Termination. This Agreement may be
terminated at any time (except with respect to clauses (h), (i), (j), (k), (l)
and (m)) prior to the Closing:
(a) by mutual written agreement of all of the
parties hereto;
(b) by Buyer after written notice to Seller of
any one or more misrepresentations in or breaches of the representations or
warranties made by Seller contained herein that, if not cured on or prior to the
Closing Date, could be reasonably expected to give Buyer grounds not to close
under Section 8.01 when taken into account with all other uncured
misrepresentations in or breaches of such representations or warranties as to
which Buyer shall have given notice to Seller as provided in this paragraph (b).
A termination pursuant to this paragraph (b) shall become effective (i) fifteen
(15) days after such notice with respect to such a misrepresentation or breach
that is not capable of being cured on or prior to the Closing Date, or (ii)
immediately prior to the Closing with respect to such a misrepresentation or
breach that is capable of being cured, but is not cured, on or prior to the
Closing Date;
(c) by Buyer after written notice to Seller of
the failure by Seller or any Entertainment Company to perform and satisfy any of
its obligations under this Agreement required to be performed and satisfied by
Seller or such Entertainment Company on or prior to the Closing Date, if the
aggregate of all such failures shall be material. A termination pursuant to this
paragraph (c) shall become effective (i) fifteen (15) days after such notice
with respect to such a failure that is not capable of being cured on or prior to
the Closing Date, or (ii) immediately prior to the Closing with respect to such
a failure that is capable of being cured, but is not cured, on or prior to the
Closing Date;
(d) by Seller after written notice to Buyer of
any one or more misrepresentations in or breaches of the representations or
warranties made by Buyer herein which, if not cured on or prior to the Closing
Date, could be reasonably expected to give Seller grounds not to close under
Section 8.02 when taken into account with all other uncured
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misrepresentations in or breaches of such representations or warranties as to
which Seller shall have given notice to Buyer as provided in this clause (d). A
termination pursuant to this paragraph (d) shall become effective (i) fifteen
(15) days after such notice with respect to such a misrepresentation or breach
that is not capable of being cured on or prior to the Closing Date, or (ii)
immediately prior to the Closing with respect to such a misrepresentation or
breach that is capable of being cured, but is not cured, on or prior to the
Closing Date;
(e) by Seller after written notice to Buyer of
Buyer's failure to perform and satisfy any of its obligations under this
Agreement required to be performed and satisfied by Buyer on or prior to the
Closing Date, if the aggregate of all such failures shall be material. A
termination pursuant to this paragraph (e) shall become effective (i) fifteen
(15) days after such notice with respect to such a failure that is not capable
of being cured on or prior to the Closing Date, or (ii) immediately prior to the
Closing with respect to such a failure that is capable of being cured, but is
not cured, on or prior to the Closing Date;
(f) by Buyer or by Seller, if the Closing
shall not have been consummated by September 30, 1997 (the "Outside Date");
provided, however, that neither Buyer nor Seller may terminate this Agreement
pursuant to this clause (f) if the Closing shall not have been consummated
within such time period by reason of the failure of such party or any of its
Affiliates to perform in all material respects any of its or their respective
covenants or agreements contained in this Agreement;
(g) by any party hereto if any Federal, state
or foreign law or regulation thereunder shall hereafter be enacted or become
applicable that makes the transactions contemplated hereby or the consummation
of the Closing illegal or otherwise prohibited, or if any judgment, injunction,
order or decree enjoining either party hereto from consummating the transactions
contemplated hereby is entered, and such judgment, injunction, order or decree
shall become final and nonappealable;
(h) by Buyer by written notice delivered to
Seller at any time prior to 5:00 p.m. (Los Angeles time) on May __, 1997(2), if
at any time prior to such time Buyer discovers any fact, occurrence or
circumstance relating to any Entertainment Company not known to Buyer on or
before the date of this Agreement that is materially adverse to the assets,
liabilities, business, operations or financial condition of the Entertainment
Companies taken as a whole.
(i) by Buyer or Seller if Seller shall have
convened a meeting of its stockholders to vote upon this Agreement and the
transactions contemplated hereby and shall have failed to obtain in writing all
consents and approvals of its stockholders required to be obtained by Seller by
virtue of the execution and delivery of this Agreement or the transactions
----------------------------------
(2) This date will be seven (7) days after the date of this Agreement.
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contemplated hereby under its Certificate of Incorporation, its Bylaws or
Applicable Law at such meeting.
(j) by Seller at any time after submission of
this Agreement and the transactions contemplated herein by the stockholders of
Seller in accordance with Applicable Law, if (i) Seller's financial advisors
shall have withdrawn (either before or after such meeting) their opinion to the
effect that the Purchase Price is fair to Seller's stockholders from a financial
point of view or (ii) Seller's Board of Directors shall have withdrawn, modified
or amended in any material respect its approval or recommendation of this
Agreement or the transactions contemplated hereby and Seller receives a legal
opinion of Delaware counsel that is reasonably acceptable to Buyer to the effect
that submission of this Agreement and the transactions contemplated hereby would
be unlawful under Delaware law.
(k) by Seller at any time prior to the approval
of this Agreement and the transactions contemplated herein by the stockholders
of Seller in accordance with Applicable Law, if Seller's Board of Directors
determines in good faith, on the basis of the advice of ▇▇▇▇, Weiss, Rifkind,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other outside counsel of comparable stature, that the
approval and adoption of this Agreement and the transactions contemplated hereby
would be inconsistent with the compliance by the Board of Directors with its
fiduciary duties to stockholders under Applicable Law.
The party desiring to terminate this Agreement pursuant to
clauses (b) through (k) shall give written notice of such termination to the
other party.
10.02. Effect of Termination. If this Agreement is
terminated as permitted by Section 10.01, such termination shall be without
liability of any party to any other party to this Agreement except as
hereinafter expressly provided in this Section 10.02. If such termination shall
result from the breach by any party of its representations, warranties or
covenants contained in this Agreement, such party shall be fully liable for any
and all Damages incurred or suffered by the other parties as a result of such
failure or breach. The provisions of Sections 5.05, 6.02, 12.04, 12.06 and 12.12
shall survive any termination of this Agreement pursuant to Article X, and each
party hereto shall be fully responsible for any breach of any such provision,
whether or not such breach occurs prior to or after the termination of this
Agreement.
10.03 Commitment Fee.
(a) To compensate Buyer for entering into this
Agreement and taking action to consummate the transactions contemplated hereby
and incurring the costs and expenses related thereto and other losses and
expenses, including the foregoing by Buyer of other opportunities, Seller agrees
to pay to Buyer an aggregate amount equal to Thirty Million Dollars
($30,000,000), less any amount due pursuant to Section 10.03(c) below (the
"Commitment Fee") if this Agreement is terminated:
(i) by Seller pursuant to Section 10.01(k);
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(ii) by Buyer or Seller pursuant to Section 10.01(i) or
(j), if in either case specified in this clause (ii), prior to the time
of Seller's meeting of stockholders (A) Seller's Board of Directors
shall have withdrawn, modified or amended in any material respect its
approval or recommendation of this Agreement or the transactions
contemplated hereby or shall have resolved to do any of the foregoing
or (B) Seller's Board of Directors shall have recommended acceptance of
any Alternative Proposal, or shall have resolved to do so; or
(iii) by Buyer or Seller pursuant to Section 10.01(i), if,
in either case specified in this clause (iii) (A) prior to the time of
Seller's meeting of stockholders an Alternative Proposal shall have
been publicly announced or shall have become publicly known or Seller's
financial advisors shall have withdrawn, modified or amended in any
material respect their opinion to the effect that the Purchase Price is
fair to Seller's stockholders from a financial point of view, (B)
Seller's Board of Directors shall not have withdrawn, modified or
amended in any material respect its approval and recommendation of this
Agreement and the transactions contemplated hereby and (C) during the
term of this Agreement or within one year after the termination of this
Agreement, Seller's Board of Directors recommends an Alternative
Proposal with a party other than Buyer, Seller or any of its Affiliates
enters into an agreement providing for an Alternative Proposal with a
party other than Buyer, or an Alternative Proposal with a party other
than Buyer occurs, and, in either case, the purchase price in respect
of such Alternative Proposal (or the portion thereof allocable to the
Entertainment Companies or their assets, if such Alternative Proposal
relates to Seller or assets and operations of Seller in addition to the
Entertainment Companies) is higher than the Purchase Price; provided,
however, that in determining such purchase price, there shall be
included therein the fair value of any property other than cash
transferred to Seller in full or partial consideration of such
transaction.
(b) The Commitment Fee shall be payable (i) at
the time of termination if the termination is by Seller pursuant to Section
10.01(l), (ii) on the next business day following termination if the termination
is by Buyer and such termination pursuant to Section 10.01(I) is covered by
clause (ii) of Section 10.03(a) and (iii) on the next business day following the
earliest of the recommendation of an Alternative Proposal, the entering into of
an agreement providing for an Alternative Proposal or the occurrence of an
Alternative Proposal, if the termination is by Seller or Buyer pursuant to
Section 10.01(I) and such termination is covered by clause (iii) of Section
10.03(a).
(c) Seller shall reimburse Buyer and its
Affiliates for actual out-of-pocket expenses, not to exceed Ten Million Dollars
($10,000,000), of Buyer and its Affiliates incurred in connection with or
arising out of this Agreement and the transactions contemplated hereby
(including, without limitation, amounts paid or payable to investment bankers,
fees and expenses of counsel, accountants and consultants, and printing
expenses), regardless of when those expenses are incurred, if this Agreement is
terminated:
(i) by Seller pursuant to Section 10.01(k);
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(ii) by Buyer or Seller pursuant to Section 10.01(i), if in
either case specified in this clause (ii), prior to the time of
Seller's meeting of stockholders (A) Seller's Board of Directors shall
have withdrawn, modified or amended in any material respect its
approval or recommendation of this Agreement or the transactions
contemplated hereby or shall have resolved to do any of the foregoing
or (B) Seller's Board of Directors shall have recommended acceptance of
any Alternative Proposal, or shall have resolved to do so; or
(iii) by Buyer or Seller pursuant to Section 10.01(i), if, in
either case specified in this clause (iii) (A) prior to the time of
Seller's meeting of stockholders an Alternative Proposal shall have
been publicly announced or shall have become publicly known or Seller's
financial advisors shall have withdrawn, modified or amended in any
material respect their opinion to the effect that the Purchase Price is
fair to Seller's stockholders from a financial point of view, (B)
Seller's Board of Directors shall not have withdrawn, modified or
amended in any material respect its approval and recommendation of this
Agreement and the transactions contemplated hereby and (C) during the
term of this Agreement or within one year after the termination of this
Agreement, Seller's Board of Directors recommends an Alternative
Proposal with a party other than Buyer, Seller or any of its Affiliates
enters into an agreement providing for an Alternative Proposal with a
party other than Buyer, or an Alternative Proposal with a party other
than Buyer occurs, and, in either case, the purchase price in respect
of such Alternative Proposal (or the portion thereof allocable to the
Entertainment Companies or their assets, if such Alternative Proposal
relates to Seller or assets and operations of Seller in addition to the
Entertainment Companies) is higher than the Purchase Price; provided,
however, that in determining such purchase price, there shall be
included therein the fair value of any property other than cash
transferred to Seller in full or partial consideration of such
transaction.
(d) Seller acknowledges that the agreements
contained in this Section 10.03 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Buyer would
not enter into this Agreement. Accordingly, if Seller fails to pay any amounts
owing pursuant to this Section 10.03 when due, Seller shall in addition thereto
pay to Buyer all costs and expenses (including attorneys' fees and costs)
incurred in collecting such amounts, together with interest on such amounts (or
any unpaid portion thereof) from the date such payment was required to be made
until the date such payment is received by Buyer at one percentage point in
excess of the Reference Rate as in effect from time to time during such period;
provided, however, that in no event shall such interest rate exceed the maximum
rate permitted by Applicable Law.
ARTICLE XI
TAX MATTERS
11.01. Tax Returns and Payments.
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(a) Seller shall be responsible for the preparation and
filing of all Seller's Consolidated Returns with respect to all Pre-Closing
Periods, which shall include the Entertainment Companies, and for the payment of
all federal Income Taxes with respect to such Consolidated Returns. Seller shall
be entitled to any refunds of Income Taxes with respect to such Tax Returns.
(b) (i) Seller shall be responsible for the
preparation and filing of all Tax Returns, other than Consolidated
Returns, of the Entertainment Companies for any Pre-Closing Period,
that are required to be filed on or before the Closing Date, and for
the payment of all Taxes with respect to such Tax Returns. Seller shall
be entitled to any refunds of Taxes with respect to such Tax Returns.
Such Tax Returns shall be prepared in a manner consistent with prior
practice, and shall utilize accounting methods, elections and
conventions that do not have the effect of distorting the allocation of
income or expense between Pre-Closing Periods and Post-Closing Periods.
(ii) Buyer shall be responsible for the
preparation and filing of all Tax Returns, other than Consolidated
Returns, of the Entertainment Companies for any Pre-Closing Period,
that are required to be filed after the Closing Date. Seller shall pay
Buyer, in immediately available funds, any Taxes that are required to
be paid with such Tax Returns, and shall be entitled to any refunds of
Taxes with respect to such Tax Returns.
(c) Buyer shall be responsible for the preparation and
filing of all Straddle Period Tax Returns with respect to the Entertainment
Companies, and for the payment of all Taxes with respect to such returns. Seller
shall reimburse Buyer, in immediately available funds, for the portion of any
Tax relating to a Straddle Period that is allocable, in accordance with
paragraph (f) below, to the pre-Closing portion of such Straddle Period, less
any estimated Taxes paid by Seller or the Entertainment Companies with respect
to such Straddle Period before the Closing Date. Any refunds of Straddle Period
taxes shall be allocated between the Seller and the Buyer based on the same
principles.
(d) Buyer shall be responsible for the preparation and
filing of all Tax Returns and the payment of all other Taxes with respect to the
Entertainment Companies for all Post-Closing Periods. Buyer shall be entitled to
any refunds of such Taxes. In the case of any Post-Closing Tax Return where the
Taxes payable by an Entertainment Company are dependent upon the Tax attributes
of or are consistent with Tax accounting methods utilized by such Entertainment
Company for a Pre-Closing Period, without Seller's consent Buyer shall not take
a position that (i) is inconsistent with a position taken by Seller for such
Pre-Closing Period and (ii) will have the effect of increasing the Seller's Tax
Liability for a Pre-Closing Period, unless in the opinion of Buyer's independent
tax counsel or accountant, Seller's position is not supported by "substantial
authority" within the meaning of Section 6662 of the Code.
(e) To the extent permitted by law, Seller and Buyer
shall use their best efforts to cause any Taxable period to close on the Closing
Date.
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(f) Taxes payable with respect to a Straddle Period shall be
allocated to the Pre-Closing Period and Post-Closing Period on the basis of a
closing of the books as of the Closing Date or any other method agreed upon by
Buyer and Seller, except that Taxes imposed on a periodic basis, such as real
and personal property Taxes, shall be prorated based on the number of days
before and after the Closing Date.
(g) Seller, Buyer and the Entertainment Companies shall
cooperate in good faith in (i) preparing and filing all Tax Returns, (ii)
maintaining and making available to each other all records necessary in
connection with the preparation and filing of all Tax Returns and the payment of
Taxes, and (iii) resolving all disputes and audits with respect to any Tax
Returns and Taxes. Buyer and Seller recognize that each may need access, from
time to time, after the Closing Date, to certain accounting and Tax records and
information held by the other; therefore, Buyer and Seller agree (i) to retain
and maintain Tax records relating to the Entertainment Companies for a period of
five years after the Closing Date, (ii) to allow each other and their agents and
representatives, at times and dates mutually acceptable to the parties, to
inspect, review and make copies of such records, such activities to be conducted
during normal business hours and at the requesting party's expense, and (iii)
and to offer the other parties such records before destroying such records.
(h) Seller shall pay any stock transfer taxes due as a result
of the sale of the Shares to Buyer pursuant to the transactions contemplated by
this Agreement.
(i) Seller shall cause the provisions of any tax sharing
agreement to which any of the Entertainment Companies is a party to be
terminated on or before the Closing Date, and the Entertainment Companies shall
have no liability to Seller or its Affiliates under any such agreements.
(j) Seller shall have the sole and exclusive authority to file
amended Consolidated Tax Returns for the Entertainment Companies for any
Pre-Closing Period, and to control any Tax audits, disputes, administrative or
judicial proceedings or settlements with respect to such Consolidated Tax
Returns. Buyer and the Entertainment Companies shall have the sole and exclusive
authority to file any other amended Tax Returns and to control any other Tax
audits, disputes, administrative or judicial proceedings or settlements with
respect to the Entertainment Companies; provided, however, that Buyer shall not
without Seller's consent file an amended Tax Return with respect to a
Pre-Closing Period or settle, compromise, challenge or litigate a Tax dispute
with respect to a Pre-Closing Period, if any such action may materially increase
Seller's liability for Taxes.
11.02 Section 338(h)(10).
(a) Seller shall join Buyer in making elections under Section
338(g) and Section 338(h)(10) of the Code and any state, local and foreign
counterparts with respect to the Entertainment Companies (the "Section 338
Elections"). Seller and Buyer shall jointly complete and make the Section 338
Elections on the applicable forms and in accordance with Applicable Law. Seller
shall deliver such forms and related documents to Buyer at least ninety (90)
days prior to the due date for filing such elections or forms. Buyer shall
deliver to Seller at least forty-
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five (45) days prior to the due date for filing, such completed forms as are
required to be filed with respect to the Section 338 Elections. Buyer and Seller
shall timely file the Section 338 Elections and any required forms and
documents.
(b) Buyer and Seller shall act reasonably and in good faith to
reach an agreement promptly, but in no event later than ninety (90) days after
the Closing Date, on the allocation of the Purchase Price among the assets of
the Entertainment Companies for purposes of the Section 338 Elections. If Buyer
and Seller are unable to reach an agreement within such ninety (90) day period,
they shall submit the issue to arbitration by a nationally recognized accounting
firm mutually acceptable to Buyer and Seller, whose determination shall be final
and binding on both parties, and whose expenses shall be shared equally by Buyer
and Seller. The valuations and allocations determined pursuant to this Section
shall be used for purposes of all relevant Tax Returns, but shall not have any
effect on any other provision of this Agreement, except insofar as these other
provisions relate to or affect Taxes or Tax Returns.
(c) Seller shall be responsible for the payment of any Taxes
of Seller Affiliated Group or the Entertainment Companies that result from the
Section 338 Elections ( the "Section 338 Taxes").
11.03. Indemnification.
(a) Seller shall indemnify Buyer and the Entertainment
Companies for (i) all liability for Taxes of the Seller Affiliated Group,
including the Entertainment Companies, for all Pre-Closing Periods and for the
portion of all Straddle Periods that end on the Closing Date (ii) all Section
338 Taxes, and (iii) all liability for reasonable legal and accounting fees and
expenses incurred with respect to any item indemnified pursuant to clauses (i)
and (ii) above.
(b) Buyer and the Entertainment Companies shall indemnify
Seller for (i) all liability for Taxes of the Buyer Affiliated Group for any
Post-Closing Taxable period, (ii) all liability for Taxes of the Entertainment
Companies for the portion of all Straddle Periods that commences after the
Closing Date, and (iii) all liability for reasonable legal and accounting
expenses incurred with respect to any item indemnified pursuant to clauses (i)
and (ii) above.
11.04. Procedures for Indemnification.
(a) If a claim is made by any Taxing authority, which, if
successful, might result in an indemnity payment by a party ("Tax Indemnitor")
to another ("Tax Indemnitee") pursuant to Section 11.02, Tax Indemnitee shall
promptly notify Tax Indemnitor in writing of such claim (a "Tax Claim"). If
notice of a Tax Claim is not given to Tax Indemnitor within a sufficient period
of time to allow Tax Indemnitor to effectively contest such Tax Claim, or in
reasonable detail to apprise Tax Indemnitor of the nature of the Tax Claim, in
each case taking into account the facts and circumstances with respect to such
Tax Claim, Tax Indemnitor shall not be liable to Tax Indemnitee to the extent
that Tax Indemnitor's ability to effectively contest such Tax Claim is actually
prejudiced as a result thereof.
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(b) With respect to any Tax Claim, Tax Indemnitor shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the foregoing,
may in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing authority with respect
thereto and may, in its sole discretion, either pay the Tax claimed and ▇▇▇ for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner; provided, however, that Tax Indemnitor shall not
settle or compromise a Tax Claim without giving thirty (30) days notice to Tax
Indemnitee and without Tax Indemnitee's consent, which shall not be unreasonably
withheld, if such settlement or compromise would result in a material Tax
Liability of Tax Indemnitee or members of its affiliated group for any Taxable
period. If Tax Indemnitee reasonably withholds its consent, the indemnification
obligation of Tax Indemnitor to Tax Indemnitee under this Article XI shall be
limited to the amount of such settlement or compromise, and Tax Indemnitee shall
have the right to take over the control of any proceedings with respect to such
Tax Claim at its own expense.
(c) Buyer and Seller shall cooperate with each other in
contesting any Tax Claim, which cooperation shall include, without limitation,
granting powers of attorney to the party who is entitled to control the
proceedings, retaining and providing records and information that are reasonably
relevant to such Tax Claim, and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder or to testify at proceedings relating to such Tax
Claim.
(d) Any payment under this Article IX shall be treated for tax
purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations.
(e) The indemnification obligations of the parties hereunder
shall survive until the expiration of the applicable statute of limitations
relating to the Taxes that are the subject of the indemnification obligation.
ARTICLE XII
MISCELLANEOUS
12.01. Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below,
(iii) if given by telex or telecopier, once such notice or other communication
is transmitted to the telex or telecopier number specified below and the
appropriate answer back or telephonic confirmation is received, provided that
such notice or other communication is promptly thereafter mailed in accordance
with the provisions of clause (ii) above or (iv) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:
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If to Seller or any Entertainment Company:
Metromedia International Group, Inc.
c/o Metromedia Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
Metromedia International Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: 212-757-3990
If to Buyer:
P&F Acquisition Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change
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the address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
12.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective.
(b) No waiver by a party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence.
No failure or delay by a party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
12.03. Construction.
(a) The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against either
party. Any reference to any Applicable Law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. Whenever required by the context, any gender shall include any other
gender, the singular shall include the plural and the plural shall include the
singular. The words "herein," "hereof," "hereunder," and words of similar import
refer to the Agreement as a whole and not to a particular section. Whenever the
word "including" is used in this Agreement, it shall be deemed to mean
"including, without limitation," "including, but not limited to" or other words
of similar import such that the items following the word "including" shall be
deemed to be a list by way of illustration only and shall not be deemed to be an
exhaustive list of applicable items in the context thereof.
(b) The parties hereto intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
12.04. Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
12.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No
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party hereto may assign either this Agreement or any of its rights, interests or
obligations hereunder without the prior written approval of each other party,
which approval shall not be unreasonably withheld.
12.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws (without reference to choice
or conflict of laws) of the State of New York.
12.07. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto.
12.08. Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to herein which are hereby incorporated by
reference) constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
12.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof. All references to an Article or Section include all
subparts thereof.
12.10. Severability. If any provision of this Agreement,
or the application thereof to any Person, place or circumstance, shall be held
by a court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
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12.11. Forum; Attorneys' Fees. Any action or proceeding
commenced under this Agreement shall be brought solely in the federal or state
courts located in the States of New York or California. In any action commenced
hereunder, the prevailing party shall be entitled to recover its attorneys' fees
and costs from the non-prevailing party in such action or proceeding. The
parties agree that in any action or claim for Damages brought by Buyer against
Seller for a breach of any representation or warranty by Seller or Orion in
Article III (other than those representations and warranties set forth in
Sections 3.01, 3.02, 3.03, 3.04, 3.17, 3.23 and 3.24), Seller shall not be
obligated to make any payments to Buyer until the aggregate amount of Damages so
incurred exceeds Fifteen Million Dollars ($15,000,000), whereupon Seller shall
be liable for all such Damages in excess of Fifteen Million Dollars
($15,000,000) up to a maximum amount equal to the Purchase Price.
12.12. Cumulative Remedies. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
12.13. Third Party Beneficiaries. No provision of this
Agreement shall create any third party beneficiary rights in any Person,
including any employee of Buyer or employee or former employee of any Seller or
any Affiliate thereof (including any beneficiary or dependent thereof).
12.14. Knowledge. Whenever "knowledge," "to the knowledge
of" "has received no notice" or "is not aware" (and all variants and derivatives
thereof) with respect to any Person, means the actual knowledge of such Person,
after reasonable inquiry. Notwithstanding the foregoing, the foregoing terms,
when applied to Seller or the Entertainment Companies, shall mean the actual
knowledge, after reasonable inquiry, of any and all officers, shareholders or
directors of Seller or any Entertainment Company.
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IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be duly executed by their respective authorized officers
as of the day and year first above written.
METROMEDIA INTERNATIONAL
GROUP, INC.
By: --------------------------------------------
Name:---------------------------------------
Title:--------------------------------------
ORION PICTURES CORPORATION
By: --------------------------------------------
Name:---------------------------------------
Title:--------------------------------------
P&F ACQUISITION CORP.
By: --------------------------------------------
Name:---------------------------------------
Title:--------------------------------------