AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of May 17, 1996
(as amended, supplemented or otherwise modified from time to time, this
"Agreement"), between METROMEDIA INTERNATIONAL GROUP, INC., a Delaware
corporation, ("Metromedia"), MPCA MERGER CORP., a Delaware corporation and a
wholly-owned subsidiary of Metromedia ("MPCA Mergerco"), and Xxxxxxx Xxxxxx and
Xxxxxx Xxxxxxx (collectively, the "Stockholders") and MOTION PICTURE CORPORATION
OF AMERICA, a Delaware corporation (the "Company").
WHEREAS, the Stockholders are the beneficial and record owners of 545,916
issued and outstanding shares (the "Shares") of common stock, $.01 par value per
share, of the Company ("Company Common Stock");
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Company has agreed that at the Effective Time (as hereinafter defined), MPCA
Mergerco will merge with and into the Company (the "Merger") and, among other
things, the Stockholders will receive shares of Metromedia in the manner
provided in Section 2;
WHEREAS, Metromedia, MPCA Mergerco and the Company wish to make certain
representations, warranties and agreements in connection with the Merger and
also prescribe various conditions to the Merger.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned thereto in Section 12 hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), MPCA Mergerco shall be merged with and into the Company at the
Effective Time. Upon and after the Effective Time, the separate corporate
existence of MPCA Mergerco shall cease and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation"). In accordance with the
DGCL, all of the rights, privileges, powers, immunities, purposes and franchises
of MPCA Mergerco and the Company shall vest in the Surviving Corporation and all
of the debts, liabilities, obligations and duties of MPCA Mergerco and the
Company shall become the debts, liabilities, obligations and duties of the
Surviving Corporation.
Section 1.2 Closing. The closing of the Merger (the "Closing") will take
place at the offices of Metromedia Company at 10:00 a.m. on a Business Day (as
hereinafter defined) mutually agreed to by Metromedia, the Company and the
Stockholders prior to the Termination Date (as hereinafter defined) following
the satisfaction or waiver by the party entitled to the benefit of such
condition of each of the conditions set forth in Articles 7 and 8 or at such
other place, time and date as Metromedia, the Company and the Stockholders may
agree. The time and date upon which the Closing occurs is referred to herein as
the "Closing Date".
Section 1.3 Effective Time. On the Closing Date (or on such other date as
Metromedia, the Company and the Stockholders may agree), MPCA Mergerco and the
Company shall cause a Certificate of Merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware, or at such later time as Metromedia, the Company
and the Stockholders agree to specify in the Certificate of Merger (the
"Effective Time").
Section 1.4 Name, Certificate of Incorporation and By-laws. The Certificate
of Incorporation (as defined in Section 104 of the DGCL) of the Company as in
effect at the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation from
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and after the Effective Time until thereafter changed or amended as provided
therein or by applicable law except that the Certificate of Incorporation of the
Surviving Corporation shall be amended at the Effective Time to decrease the
number of authorized shares to 1000. The By-laws of the Company at the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
Section 1.5 Officers and Directors.
(a) The by-laws of the Surviving Corporation shall be amended to
provide that each of the directors of MPCA Mergerco and the Company at the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office until their respective successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and By-laws of the Surviving Corporation.
(b) The officers set forth on Schedule 1.5 hereto shall be the
officers of the Surviving Corporation and they shall hold office until their
respective successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK AND OPTIONS;
EXCHANGE OF CERTIFICATES
Section 2.1 Effect on Capital Stock of the Company. At the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof:
(a) Conversion of Shares of Company Common Stock. Each issued and
outstanding share of Company Common Stock (the "Company Common Stock") shall,
subject to compliance with Section 2.2, be converted into the right to receive
the Initial Shares, the Adjustment Shares (as defined herein) and, to the extent
the Closing Date Boot Limit exceeds the Existing Note Amount (as such terms are
defined in Section 2.3), the additional consideration set forth in Section 2.3
to the extent of such excess. At the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding
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and shall automatically be cancelled and retired and shall cease to exist, and
the Stockholders, who collectively hold certificates representing all such
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive for each share of Company Common Stock
outstanding at the Effective Time (a) the Initial Shares (as defined herein) to
be issued in consideration therefor upon surrender of such certificates in
accordance with Section 2.2, without interest, plus (b) the Adjustment Shares
(as defined herein), if any, to be issued on the Adjustment Date (as defined
herein), without interest. The term "Initial Shares" shall mean a number of
fully paid and non-assessable shares of Common Stock , par value $1.00 per
share, of Metromedia (the "Metromedia Common Stock") equal to a fraction
(rounded to the fourth decimal point), (i) the numerator of which is 1,433,636
and (ii) the denominator of which is the number of shares of Company Common
Stock outstanding at the Effective Time ("Company Outstanding Shares"). The term
"Adjustment Shares" shall mean (A) if the Average Closing Price (as defined
herein) is less than $16.50, a number of fully paid an non-assessable shares of
Metromedia Common Stock equal to (i) a fraction (rounded to the fourth decimal
point), (a) the numerator of which is (I) 23,655,000 less (II) the product of
(x) 1,433,636 and (y) the Average Closing Price, and (b) the denominator of
which is the Average Closing Price, divided by (ii) the number of Company
Outstanding Shares (rounding the quotient of (i) and (ii) to the fourth decimal
point); provided, however, that in no event shall the Adjustment Shares exceed
(i) 458,764 divided by (ii) the number of Company Outstanding Shares, or (B) if
the Average Closing Price is greater than or equal to $16.50, zero. The term
"Average Closing Price" shall have the meaning ascribed to such term in that
certain Agreement and Plan of Merger (the "Goldwyn Merger Agreement") dated as
of January 31, 1996 by and among Metromedia, SGC Merger Corp. and The Xxxxxx
Xxxxxxx Company; provided, however, if the transactions contemplated by the
Goldwyn Merger Agreement are not consummated on or before September 30, 1996,
the term "Average Closing Price" shall mean the average of the last sale prices
for the Metromedia Common Stock as reported by the American Stock Exchange for
the last 20 consecutive trading days ending on September 30, 1996. The term
"Adjustment Date" shall
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mean five business days following the earlier of (i) the consummation of the
transactions contemplated by the Goldwyn Merger Agreement and (ii) September 30,
1996.
(c) Treasury Shares. Each share of Company Common Stock held in
treasury by the Company immediately prior to the Effective Time shall, by virtue
of the Merger, be cancelled and retired and cease to exist, without any
conversion thereof.
(d) Mergerco Common Stock. Each then issued outstanding share of
Common Stock, par value $.01 per share ("Mergerco Common Stock") of MPCA Merger
Co. shall be converted into one fully paid and non-assessable share of Common
Stock, $.01 par value per share of the Surviving Corporation.
Section 2.2 Exchange of Certificates.
(a) Exchange Procedures. At the Closing, the Stockholders shall
deliver to Metromedia all of the issued and outstanding shares of stock of
Company Common Stock, including the Restricted Stock, and Metromedia shall
deliver to the Stockholders the Initial Shares. The Adjustment Shares shall be
delivered to the Stockholders on the Adjustment Date. The notes and/or other
shares of Metromedia Common Stock issuable to the Stockholders pursuant to
Section 2.3 on account of the Company Common Stock and the existing indebtedness
of the Company to the Stockholders shall be delivered as set forth in Section
2.3.
(b) Rule 144 Legend. The shares delivered to the Stockholders in
accordance with Section 2.2(a) and, if applicable, Section 2.3, shall contain a
restrictive legend pursuant to Rule 144 under the Securities Act of 1933, as
amended.
Section 2.3 Stockholder Loans; Additional Consideration.
(a) For purposes of this Section 2.3, the following terms shall have
the following meanings:
(i) "Tax Fair Market Value Per Share" of Metromedia Common Stock
on a certain date shall mean the lesser of (A) the closing price of Metromedia
Common Stock as reported by the American Stock Exchange for such date or (B) the
average of the high and the low price of Metromedia Common Stock as reported by
the American Stock Exchange for such date.
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(ii) "Existing Note Amount" shall mean the aggregate principal
amount of the existing indebtedness of the Company to the Stockholders
determined at the close of business on the date immediately preceding the date
during which the Effective Time occurs, but not to exceed $5,000,000.
(iii) "Closing Date Boot Limit" shall mean 25% of the Tax Fair
Market Value Per Share at the Effective Time multiplied by the number of Initial
Shares.
(iv) "Test Principal Amount" of a note described in this Section
2.3 shall be the amount assigned to it in such Section 2.3. The actual principal
amount of such a note shall be determined pursuant to Section 2.3(g) below.
(v) "Maximum Additional Note Amount" shall mean the excess, if
any, of $5,000,000 over the aggregate principal amount of notes issued pursuant
to Sections 2.3(c)(i) or 2.3(d)(ii) below.
(vi) "Stock Amount" shall mean the excess, if any, of the Maximum
Additional Note Amount over the Test Principal Amount of the notes issued
pursuant to Section 2.3(e) below.
(b) If the Closing Date Boot Limit equals or exceeds $5,000,000, then
at the Closing:
(i) Metromedia shall issue to each of the Stockholders a note
dated as of the Effective Date with principal amount equal to, and in
replacement for, the existing indebtedness of the Company to such Stockholder,
(ii) Metromedia shall issue to the Stockholders, between them in
proportion to the number of shares of Company Common Stock, shares which such
Stockholders deliver pursuant to Section 2.2(a), notes dated as of the Effective
Date with aggregate Test Principal Amounts equal to the difference between
$5,000,000 and the aggregate principal amounts of the notes issued pursuant to
Section 2.3(b)(i) above, and
(iii) Section 2.3(e) shall not apply.
(c) If the Closing Date Boot Limit is less than $5,000,000 but greater
than or equal to the Existing Note Amount, then:
(i) Metromedia shall issue to each of the Stockholders a note
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dated as of the Effective Date with principal amount equal to, and in
replacement for, the existing indebtedness of the Company to such Stockholder,
and
(ii) The provisions of Section 2.3(e) shall apply.
(d) If the Closing Date Boot Limit is less than the Existing Note
Amount, then:
(i) The Stockholders shall contribute to the capital of the
Company as of the Effective Time an amount of the Company's existing
indebtedness to the Stockholders equal to the excess of the Existing Note Amount
over the Closing Date Boot Limit, between the Stockholders in proportion to
their amounts of the Company's indebtedness to the Stockholders, to reduce the
amount of the Company's indebtedness outstanding to the Stockholders at that
time to the Closing Date Boot Limit,
(ii) Metromedia shall issue to each of the Stockholders a note
dated as of the Effective Date with principal amount equal to, and in
replacement for, the then reduced indebtedness of the Company to such
Stockholder and
(iii) The provisions of Section 2.3(e) shall apply.
(e) If the Closing Date Boot Limit is less than $5,000,000, then this
Section 2.3(e) applies and on the Adjustment Date, Metromedia shall issue to the
Stockholders, between them in proportion to the number of shares of Company
Common Stock which such Stockholders deliver pursuant to Section 2.2(a), notes
dated as of the Adjustment Date with aggregate Test Principal Amounts equal to
the Maximum Additional Note Amount, but not to exceed the lesser of the amounts
D and E in the equations below:
D = [.25 x TFMV2 x (N1 + N2)] - FN
E = [.25 x [ (TFMV1 x N1) + (TFMV2 x N2))] - FN
where
TFMV1 = the Tax Fair Market Value per share at Effective Time
TFMV2 = the Tax Fair Market Value per share on the Adjustment Date
N1 = the aggregate number of Initial Shares
N2 = the aggregate number of Adjustment Shares
FN = the principal amount of notes issued pursuant to Sections 2.3(c)(i) or
2.3(d)(ii).
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(f) If the Closing Date Boot Limit is less than $5,000,000 so that
Section 2.3(e) applies but the Test Principal Amount of the notes issued
pursuant to such Section 2.3(e) is less than the Maximum Additional Note Amount,
then Metromedia shall, on the Adjustment Date, issue to the Stockholders,
between them in proportion to the number of shares of Company Common Stock which
such Stockholders deliver pursuant to Section 2.2(a), a number of shares of
Metromedia Common Stock equal to N3 in the equation:
N3 = Stock Amount/Average Closing Price,
then rounded down to the next lowest whole number of shares of Metromedia Common
Stock , provided, however, that the number of shares issued pursuant to this
Section 2.3(f) shall not exceed 974,872
(g) Any notes issued by Metromedia pursuant to Section 2.3 shall bear
interest at the applicable federal rate as defined in Section 1274 of the
Internal Revenue Code of 1986, as amended and shall be due 10 days after the
Adjustment Date. Any notes issued pursuant to Sections 2.3(b)(ii) and 2.3(e)
shall have an actual principal amount computed as follows: the Test Principal
Amount of each note shall be reduced by $500, and such reduced amount shall be
rounded down to the nearest even multiple of $1000.
(h) The notes and/or shares of Metromedia Common Stock issued pursuant
to this Section 2.3, to the extent equal to or less than the Existing Note
Amount shall be in satisfaction of the existing indebtedness of the Company to
the Stockholders.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3. The Company represents and warrants to Metromedia as follows:
3.1 Due Incorporation and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and lawful authority to own,
lease and operate its Properties and to carry on its business as is presently
being conducted.
3.2 Subsidiaries and Other Affiliates. Schedule 3.2 sets forth the
name
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and jurisdiction of organization of each corporation or other entity
(collectively, "Subsidiaries") in which the Company directly or indirectly owns
or has the power to vote shares of any capital stock or other ownership
interests having voting power to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, as
the case may be. Except for the Subsidiaries and except as set forth on Schedule
3.2, the Company does not directly or indirectly own any ownership interest in
any other Person. Each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the corporate power and lawful authority to own, lease and
operate its Properties and to carry on its business as is presently being
conducted.
3.3 Qualification. The Company and each of the Subsidiaries is duly
qualified or otherwise authorized as a foreign corporation to transact business
and is in good standing in each jurisdiction set forth on Schedule 3.3, which
are the only jurisdictions in which such qualification or authorization is
required by law, except in those jurisdictions in which failure to be so
qualified or authorized would not, in the aggregate have a material adverse
effect on the Properties, business, operation or financial condition of the
Company and the Subsidiaries taken as a whole (a "Material Adverse Effect").
3.4 Outstanding Capital Stock. The Company is authorized to issue
545,916 shares of Company Common Stock, of which 545,916 shares are issued, and
are outstanding and no shares are held by the Company as treasury stock. All of
the outstanding shares of Common Stock are owned by the Stockholders in the
respective amounts set forth on Exhibit A. The authorized and issued shares of
capital stock of each Subsidiary are set forth on Schedule 3.4. All issued and
outstanding capital stock of each Subsidiary is owned by the Company, free and
clear of any lien, pledge, mortgage, security interest, claim, lease, charge,
option, right of first refusal, easement, servitude, transfer restriction under
any shareholder or similar agreement, encumbrance or any other restriction or
limitation whatsoever (collectively, "Liens"), except as created by this
Agreement and except for limitations on transfers imposed by Federal and state
securities or "blue sky" laws. All of the outstanding shares of capital stock of
the Company and the Subsidiaries are
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duly authorized and validly issued, fully paid and nonassessable. No other class
of capital stock or other ownership interests of the Company or any of the
Subsidiaries is authorized or outstanding.
3.5 Options or Other Rights. Except as set forth on Schedule 3.5,
there is no outstanding right, subscription, warrant, call, unsatisfied
preemptive right, option or other agreement of any kind to purchase or otherwise
to receive from the Company, any of the Subsidiaries or any Stockholder any of
the outstanding, authorized but unissued, unauthorized or treasury shares of the
capital stock or any other security of the Company or any of the Subsidiaries,
and there is no outstanding security or instrument of any kind convertible into,
exercisable for, or exchangeable for any such capital stock.
3.6 Charter Documents and Corporate Records. The Company has
heretofore caused to be delivered to Metromedia true and complete copies of the
Certificates of Incorporation and By-laws, or comparable instruments, of the
Company and each of the Subsidiaries as in effect on the date hereof and has
made available for inspection the true and complete minute books of the Company
and each of the Subsidiaries through the date hereof.
3.7 Financial Statements. The combined balance sheets of the Company
and its Affiliates as of December 31, 1993, December 31, 1994, and December 31,
1995 and the related combined statements of income, and retained earnings and
partners' capital and cash flows for the years then ended, including the
footnotes thereto, certified by KPMG Peat Marwick, independent certified public
accountants, which have been delivered to Metromedia, fairly present in all
material respects the combined financial position of the Company and its
Affiliates as at such dates and the combined results of operations of the
Company and its Affiliates for such respective periods, in each case in
accordance with generally accepted accounting principles consistently applied
for the periods covered thereby. The foregoing combined financial statements of
the Company and its Affiliates as of December 31, 1995, and for the year then
ended are sometimes herein called the "Audited Financials". The unaudited
combined balance sheet of the Company and its Affiliates as of March 31, 1996
and the related combined statement of income which have
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been delivered to Metromedia, fairly present in all material respects the
combined financial position of the Company and its Affiliates as at such date
and the results of operations of the Company for the three months then ended, in
each case in conformity with generally accepted accounting principles applied on
a basis consistent with that of the Audited Financials (subject to the normal
year-end adjustments described in Schedule 3.7) and with all interim financial
statements of the Company heretofore delivered to Metromedia. The foregoing
unaudited combined financial statements of the Company and its Affiliates as of
March 31, 1996 and for the three months then ended are sometimes herein called
the "Interim Financials," the combined balance sheet included in the Interim
Financials is sometimes herein called the "Balance Sheet" and March 31, 1996 is
sometimes herein called the "Balance Sheet Date." Except as set forth on
Schedule 3.7, all of the assets reflected on the Balance Sheet are owned by the
Company or one of its Affiliates.
3.8 No Material Adverse Change. Except as set forth on Schedule 3.8,
since the Balance Sheet Date, there has been no material adverse change in the
Properties, business, prospects, results of operations or financial condition of
the Company and the Subsidiaries taken as a whole (a "Material Adverse Effect")
other then changes in prospects resulting from changes in general economic,
political, legal or other like conditions and in the motion picture industry
generally. Neither the Company nor any of the Subsidiaries Knows (as defined in
Section 12.1(ii)) of any fact, event, circumstance or change which is reasonably
likely to have a Material Adverse Effect and neither the Company nor any of its
Subsidiaries knows of any fact, event, circumstance or change which is
reasonably likely to result in any damage, destruction or loss of value with
respect to the Properties of the Company or any of the Subsidiaries not covered
by insurance which has had a Material Adverse Effect.
3.9. Tax Matters.
(i) Schedule 3.9(a) identifies all partnerships and corporations
which were predecessors or were Affiliates of the Company and the Subsidiaries.
(ii) Schedule 3.9(a)(ii) identifies which corporations, included
among the Company, the Subsidiaries, and their respective predecessors or
Affiliates were
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intended to be taxed as "S Corporations" pursuant to Sections 1362 et. seq. of
the Internal Revenue Code of 1986, as amended (Code") and comparable provisions
of state and local tax laws applicable to such corporations (the "S
Corporations"). The S Corporations timely filed elections to be taxed as "S
Corporations" pursuant to Sections 1362 et. seq. of the Code and comparable
provisions of state and local tax laws applicable to the S Corporations. The
Company has provided Metromedia with copies of any such elections. The S
Corporations' elections did not terminate under Sections 1362(d)(2) or (3) of
the Code or comparable provisions of state and local tax laws applicable to the
S Corporations, and such elections remained in full force and effect and were
not voluntarily revoked, until such S Corporations were liquidated, merged with
and into the Company or became one of the Subsidiaries.
(iii) All federal, state, county, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated, excise,
sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital
levy, production, transfer, withholding, employment, unemployment compensation,
payroll related, property, import duties and other governmental charges and
assessments), whether or not measured in whole or in part by net income, and
including deficiencies, interest, additions to tax or interest, and penalties
with respect thereto, (hereinafter "Taxes" or, individually, a "Tax") required
to be paid on or before the date hereof (after giving effect to any applicable
extensions) by or with respect to the Company, the Subsidiaries and their
respective predecessors or Affiliates (or any of them), have been, or will be,
timely paid when due (including extensions), except with respect to Taxes for
which the failure to pay would not have a Material Adverse Effect with respect
to the Company and the Subsidiaries taken as a whole.
(iv) All material declarations, reports, information returns,
statements and returns for Taxes (hereinafter "Tax Returns" or, individually, a
"Tax Return") required to be filed by or with respect to the Company, the
Subsidiaries or their respective predecessors or Affiliates (or any of them) on
or before the date hereof have been timely filed. No penalties or other charges
in a material amount are or will become due with
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respect to the late filing of any Tax Return of the Company, the Subsidiaries or
their respective predecessors or Affiliates or the payment of any Tax of the
Company, the Subsidiaries or their respective predecessors or Affiliates,
required to be filed or paid on or before the date hereof.
(v) With respect to all Tax Returns filed by or with respect to
the Company and any of the Subsidiaries or their respective predecessors or
Affiliates, (A) Schedule 3.9(b) sets forth the periods for which the statute of
limitations for the assessment of federal Taxes have expired; (B) except as set
forth in Schedule 3.9(b), neither the Company nor the Subsidiaries has been
notified that, nor to the Knowledge of the Stockholders is, there an audit in
progress and no extension of time has been executed with respect to any date on
which any Tax Return was or is to be filed and no waiver or agreement has been
executed for the assessment or payment of any Tax; and (C) except as set forth
in Schedule 3.9(b), there is no material unassessed deficiency of Taxes proposed
or threatened against the Company or any of the Subsidiaries or any of their
respective predecessors or Affiliates.
(vi) Except as set forth in Schedule 3.9(c), none of the Company
or any of the Subsidiaries or any of their respective predecessors or Affiliates
has been or is a party to any tax sharing agreement or similar arrangement.
3.10 Compliance with Laws. Neither the Company nor any of the
Subsidiaries is in violation of any applicable order, judgment, injunction,
award, decree or writ (collectively, "Orders"), or any applicable law, statute,
code, ordinance, regulation or other requirement (collectively, "Laws"), of any
government or political subdivision thereof, whether federal, state, local or
foreign, or any agency or instrumentality of any such government or political
subdivision, any court or arbitrator (collectively, "Governmental Bodies") the
enforcement of which would have a Material Adverse Effect on the condition of
the Company and the Subsidiaries taken as a whole, and except as set forth on
Schedule 3.10, neither the Company nor any of the Subsidiaries has received
notice that any such violation is being or may be alleged. The Company and the
Subsidiaries have not made any illegal payment to officers or employees of any
Governmental Body, or made any payment
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to customers for the sharing of fees or to customers or suppliers for rebating
of charges, or engaged in any other reciprocal practice, or made any illegal
payment or given any other illegal consideration to purchasing agents or other
representatives of customers in respect of sales made or to be made by the
Company or any of the Subsidiaries.
3.11 Permits. The Company and the Subsidiaries have all licenses,
permits, orders or approvals of, and have made all required registrations with,
any Governmental Body that are material to the current conduct of the business
of, or the current use of any of the Properties of, the Company or any of the
Subsidiaries (collectively, "Permits"). All Permits are listed on Schedule 3.11
and are in full force and effect; no material violations are or have been
recorded in respect of any Permit; and no proceeding is pending or, to the
Knowledge of the Company, any of the Subsidiaries or any of the Stockholders,
threatened to revoke or limit any Permit. No action by the Stockholders, the
Company or Metromedia is required in order that all Permits will remain in full
force and effect following the consummation of the transactions provided for
herein.
3.12 No Breach. The execution, delivery and performance of this
Agreement by the Stockholders and the consummation of the transactions
contemplated hereby, including but not limited to, the conversion of shares
pursuant to Section 2.1 hereof (the "Contemplated Transactions") will not (i)
violate any provision of the Articles of Incorporation or By-laws of the Company
or any of the Subsidiaries; (ii) require the Stockholders, the Company or any of
the Subsidiaries to obtain any consent, approval or action of, or make any
filing with or give any notice to, any Governmental Body or any other Person,
except (a) filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
Act") and (b) as set forth on Schedule 3.12 (b) (the "Required Consents"); (iii)
if the Required Consents are obtained, violate, conflict with or result in the
breach of any of the terms of, result in a material modification of the effect
of, otherwise cause the termination of or give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material contract, agreement, indenture, note,
bond, loan, instrument, lease, conditional sale contract, mortgage, license,
franchise,
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commitment or other binding arrangement (collectively, the "Contracts") to which
the Company or any of the Subsidiaries is a party or by or to which any of them
or any of their Properties may be bound or subject, or result in the creation of
any Lien upon the material Properties of the Company or any of the Subsidiaries
pursuant to the terms of any such Contract; (iv) if the Required Consents are
obtained, violate any Order of any Governmental Body against, or binding upon,
the Company or any of the Subsidiaries or upon their respective securities,
Properties or business; (v) if the Required Consents are obtained, violate any
Law of any Governmental Body; or (vi) if the Required Consents are obtained,
violate or result in the revocation or suspension of any Permit.
3.13 Claims and Proceedings. There are no outstanding Orders of any
Governmental Body against or involving the Company or any of the Subsidiaries.
Except as set forth on Schedule 3.13, there are no actions, suits, claims or
legal, administrative or arbitral proceedings, public investigations or to the
Knowledge of the Company, any private investigations (collectively, "Claims")
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) pending, or to the Knowledge of the Company or any of the
Subsidiaries, threatened, against or involving the Company or any of the
Subsidiaries or any of their Properties as set forth on Schedule 3.13, to the
Knowledge of the Company, any of the Subsidiaries or any of the Stockholders,
there is no fact, event or circumstance that may give rise to any Claim. All
notices required to have been given to any insurance company listed as insuring
against any material Claim set forth on Schedule 3.13 have been timely and duly
given and, except as set forth on Schedule 3.13, no insurance company has
asserted, orally or in writing, that such Claim is not covered by the applicable
policy relating to such Claim. Except as set forth on Schedule 3.13, no claims
pending or threatened against or involving the Company or any of its
Subsidiaries have been settled, adjudicated or otherwise disposed of since
December 31, 1995.
3.14 Contracts. (a) Schedule 3.14 sets forth all of the following
Contracts to which the Company or any of the Subsidiaries is a party or by or to
which any of them or any of their Properties may be bound or subject: (i)
Contracts with any current or former officer, director, shareholder, employee,
consultant, agent or other representative
15
or with an entity in which any of the foregoing is a controlling Person; (ii)
Contracts with any labor union or association representing any employee or
former employee; (iii) Contracts for the sale of any Properties other than in
the ordinary course of business or for the grant to any Person of any option or
preferential rights to purchase any material Properties; (iv) partnership or
joint venture agreements; (v) Contracts under which the Company or any of the
Subsidiaries agrees to indemnify any party or to share tax liability of any
party; (vi) material Contracts which cannot be cancelled without liability,
premium or penalty only on 90 days' or more notice; (vii) Contracts containing
covenants of the Company or any of the Subsidiaries not to compete in any line
of business or with any Person in any geographical area or covenants of any
other Person not to compete with the Company or any of the Subsidiaries in any
line of business or in any geographical area; (viii) Contracts relating to the
acquisition by the Company or any of the Subsidiaries of any operating business
or the capital stock of any other Person; (ix) Contracts relating to the
borrowing of money; (x) Contracts containing obligations or liabilities of any
kind to holders of the capital stock of the Company as such (including, without
limitation, an obligation to register any of such securities under any federal
or state securities laws); (xi) Contracts pursuant to which the Company or any
of the Subsidiaries may hold or use any interest owned or claimed by the Company
or any of the Subsidiaries in or to any material Property; (xii) management
Contracts and other similar agreements with any Person; (xiii) any other
Contracts pursuant to the terms of which there is either a current or future
obligation or right of the Company or any of the Subsidiaries to make payments
in excess of $50,000 or receive payments in excess of $100,000; (xiv) Contracts
with respect to the development, financing or production of motion picture,
video, television or interactive productions; (xv) Distribution Contracts; (xvi)
material Contracts relating to the acquisition of Product, including Contracts
relating to the acquisition of licensing and distribution rights with respect to
such Product; (xvii) Contracts with motion picture studios; (xviii) Contracts
relating to television sales and distribution of Product; (xix) Contracts
entitling the Company or its Subsidiaries or any Affiliate, including the
Stockholders, to Contingent Compensation; and (xx) material Contracts relating
to any other Product.
16
(b) There have been delivered to Metromedia true and complete copies
of all of the Contracts set forth on Schedule 3.14 or on any other Schedule. All
of the Contracts are valid and binding upon the Company or one of the
Subsidiaries, as the case may be, in accordance with their terms subject as to
enforcement, as to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity. Neither the Company nor any of the
Subsidiaries is in default in any material respect under any of such Contracts,
nor does any condition exist that with notice or lapse of time or both would
constitute such a material default thereunder. To the Knowledge of the Company,
any of the Subsidiaries or any of the Stockholders, no other party to any such
Contract is in default thereunder in any material respect nor does any condition
exist that with notice or lapse of time or both would constitute such a material
default thereunder.
3.15 Real Estate.
3.15.1 Ownership of Premises. The Company and its Subsidiaries do
not own any real property or any buildings, structures and other improvements
located on any real property (collectively, "Owned Real Property").
3.15.2 Leased Properties. Except for short-term space leases
entered into by the Company or a Subsidiary in connection with producing a
specific Product, Schedule 3.15.2 is a true, correct and complete schedule of
all leases, subleases, licenses and other agreements (collectively, the "Real
Property Leases") under which the Company or any Subsidiary uses or occupies or
has the right to use or occupy, now or in the future, any real property (the
land, buildings and other improvements covered by the Real Property Leases being
herein called the "Leased Real Property"), which Schedule 3.15 sets forth the
date of and parties to each Real Property Lease, the date of and parties to each
amendment, modification and supplement thereto, the term and renewal terms
(whether or not exercised) thereof and a brief description of the Leased Real
Property covered thereby. The Company has heretofore delivered to Metromedia
true, correct and complete copies of all Real Property Leases (including all
modifications, amendments and supplements). Each Real Property Lease is a legal,
valid, binding and enforceable obligation of the Company
17
and is in full force and effect, subject as to enforcement, as to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and to general
principles of equity. All rent and other sums and charges payable by the Company
or a Subsidiary as tenant under any Real Property Lease are current, no notice
of default or termination under any Real Property Lease is outstanding, no
termination event or condition or uncured material default on the part of the
Company or the applicable Subsidiary, or to the Knowledge of the Company or the
applicable Subsidiary on the part of the landlord, exists under any Real
Property Lease, and no event has occurred and no condition exists which, with
the giving of notice or the lapse of time or both, would constitute such a
default or termination event or condition on the part of the Company or the
applicable Subsidiary or, to the Knowledge of the Company or the applicable
Subsidiary on the part of the landlord. Except as set forth on Schedule 3.15.2,
to the Knowledge of the Company or the applicable Subsidiary, none of the Leased
Real Property and the Real Property Leases contravenes any zoning ordinance or
other administrative regulation or violates any restrictive covenant, easement
or other agreement to which the lessee under any such Real Property Lease is
bound, the effect of which in any material respect would interfere with or
prevent the continued use of the Leased Real Property for the purposes for which
it is now being used by the Company or the applicable Subsidiary.
3.15.3 Entire Premises. All of the land, buildings, structures
and other improvements used by the Company and the Subsidiaries in the conduct
of their business are included in the Leased Real Property except for land,
building, structures and other improvements subject to short term space leases
entered into by the Company or a Subsidiary in connection with producing a
particular item of Product.
3.16 Intellectual Property. Schedule 3.16 sets forth a list of the
Company's registered patents, registered trademarks, registered service marks,
registered trade names, registered copyrights and franchises, all applications
for any of the foregoing and all permits, grants and licenses or other rights
running to the Company and any of its Subsidiaries relating to any of the
foregoing that are material to the business of the
18
Company and its Subsidiaries. Except as set forth on Schedule 3.16, (i) the
Company or one of the Subsidiaries own, or are licensed or otherwise have the
right, to use all registered patents, registered trademarks, registered service
marks, registered trade names, registered copyrights and franchises set forth on
Schedule 3.16, and (ii) the Company's rights in the property set forth on such
list are free and clear of any Lien or other encumbrances and the Company and
the Subsidiaries have not received written notice of any adversely-held patent,
invention, trademark, service xxxx or trade name of any other person, or notice
of any charge or claim of any person relating to such intellectual property or
any process or confidential information of the Company and its Subsidiaries and
to the Company's Knowledge there is no basis for any such charge or claim, and
(iii) the Company, the Subsidiaries and their respective predecessors, if any,
have not conducted business at any time during the period beginning five years
prior to the date hereof under any corporate or partnership, trade or fictitious
names other than as set forth on Schedule 3.16.
3.17 Ownership of Product; Copyrights and Other Rights. The Products
listed on Schedule 3.17 comprise all of the material Products in which the
Company or any of the Subsidiaries has any right, title, or interest in or to
(either directly or through a joint venture or partnership). As to each item
listed on Schedule 3.17 hereto, the party holding such interests, if not the
Company or a Subsidiary, to the Knowledge of the Company, has duly recorded its
interests in the United States Copyright Office. All such recordation is listed
on Schedule 3.17. To the Knowledge of the Company, none of the Company's or any
Subsidiaries' right, title or interest in any Product and component parts
thereof violates or infringes upon in any material respect any copyright, right
of privacy, trademark, patent, trade name, performing right or any literary,
dramatic, musical, artistic, personal, private, contract or copyright or any
other right of any Person or contain any libelous or slanderous material. There
is no claim, suit, action or proceeding pending, or to the Knowledge of the
Company or any of the Subsidiaries, threatened against the Company or any of the
Subsidiaries that involves a claim of infringement of any copyright with respect
to any Product listed on Schedule 3.17 and neither the Company nor any of the
Subsidiaries has any Knowledge of any existing infringement by any other Person
of any
19
copyright held by the Company or the Subsidiaries with respect to any Product.
3.18 Title to Properties. Except as set forth elsewhere in this
Agreement or the Schedules hereto, the Company and the Subsidiaries own outright
and have good and marketable title to all of their Properties, including,
without limitation, all of the assets reflected on the Balance Sheet or
currently used in the operation of their businesses (other than the Leased Real
Property) in each case free and clear of any material Lien.
3.19 Liabilities. Except as set forth on Schedule 3.19, as at March
31, 1996, the Company and the Subsidiaries did not have any material direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, known or unknown, fixed or unfixed, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, whether or not of a kind required by generally accepted accounting
principles to be set forth on a financial statement or in the notes thereto
("Liabilities") that were not fully and adequately reflected or reserved against
on the Balance Sheet dated March 31, 1996 or described on any Schedule or in the
notes to the Audited Financials. Except as set forth on Schedule 3.19 or
described on any Schedule to this Agreement, (x) the Company and the
Subsidiaries have not, except in the ordinary course of business, incurred any
material Liabilities since the Balance Sheet Date and (y) neither the Company
nor any of the Subsidiaries has any Knowledge of any circumstance, condition,
event or arrangement that may hereafter give rise to any Liabilities of the
Company or any of the Subsidiaries or any successor to their businesses except
in the ordinary course of business.
3.20 Employee Benefit Plans.
Except as set forth on Schedule 3.20, there are no employee
benefit plans or arrangements of any type (whether or not described in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended and the
regulations thereunder ("ERISA"), and including, without limitation, plans or
arrangements providing for deferred compensation, bonuses, stock options, fringe
benefits, cafeteria plan deferrals, flexible arrangements or other similar plans
or arrangements), under which the Company or any of its Subsidiaries has or in
the future could have, directly or indirectly, any liability with
20
respect to any current or former employee of the Company, any Subsidiary or any
Commonly Controlled Entity (within the meaning of section 414(b), (c), (m), (n)
or (o) of the Code) ("Benefit Plans").
3.21 Employee Relations. Except with respect to Projects where members
of the Screen Actors Guild, the Directors Guild of America, the Writers Guild of
America or other union representation for "below the line" personnel are engaged
by the Company or a Subsidiary, no union organizing efforts have been conducted
within the last five years or are now being conducted. For purposes of this
section 3.21, "below the line personnel" shall mean all persons (other than
authors, screenwriters, producers, directors and actors) engaged by the Company
or its Subsidiaries in connection with the production of a film. Neither the
Company nor any of the Subsidiaries has at any time during the last five years
had, nor, to the Knowledge of the Company nor any of the Subsidiaries, is there
now threatened, a strike, picket, work stoppage, work slowdown or other labor
trouble.
3.22 Insurance. Schedule 3.22 sets forth a list (specifying the
insurer, describing each pending claim thereunder of more than $50,000 and
setting forth the aggregate amounts paid out under each such policy through the
date hereof and the aggregate limit, if any, of the insurer's liability
thereunder) of all policies or binders of fire, liability, product liability,
workmen's compensation, vehicular and other insurance held by or on behalf of
the Company or any of the Subsidiaries. Such policies and binders are valid and
binding in accordance with their terms, are in full force and effect. Neither
the Company nor any of the Subsidiaries is in default with respect to any
provision contained in any such policy or binder or has failed to give any
notice or present any claim under any such policy or binder in due and timely
fashion. There are no outstanding unpaid claims under any such policy or binder,
and neither the Company nor any of the Subsidiaries has received any notice of
cancellation or non-renewal of any such policy or binder. Neither the Company
nor any of the Subsidiaries has received any notice from any of its insurance
carriers that any insurance premiums will or may be materially increased in the
future or that any insurance coverage listed on Schedule 3.22 will or may not be
available in the future on terms or subject to conditions which would make
renewal thereof onerous.
21
3.23 Officers, Directors and Key Employees. Schedule 3.23 sets forth
(i) the name and the scheduled 1996 total compensation of each officer and
director of the Company and the Subsidiaries, (ii) the name and scheduled total
compensation of each other employee, consultant, agent or other representative
of the Company or any of the Subsidiaries whose current or committed annual rate
of compensation (including bonuses and commissions) exceeds $150,000, (iii) all
wage and salary increases, bonuses and increases and any other direct or
indirect compensation received by such Persons since December 31, 1995, (iv) any
payments or commitments to pay any severance or termination pay to any such
Persons, and (v) any accrual for, or any commitment or agreement by the Company
or any of the Subsidiaries to pay, such increases, bonuses or pay. None of such
Persons has indicated that he or she will cancel or otherwise terminate such
Person's relationship with the Company or any of the Subsidiaries.
3.24 Operations of the Company. Except as set forth on Schedule 3.24
or on any other Schedule, since the Balance Sheet Date neither the Company nor
any of the Subsidiaries has:
(i) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(ii) except for short-term bank borrowings in the ordinary course
of business and except for borrowings with respect to the Project Xxxxxxx Hills
Ninja, incurred any indebtedness for borrowed money;
(iii) reduced its cash or short-term investments or their
equivalent, other than to meet cash needs arising in the ordinary course of
business, consistent with past practices and to pay year end employee bonuses
which are set forth on Schedule 3.23;
(iv) waived any material right under any contract or other
agreement of the type required to be set forth on any Schedule;
(v) made any material change in its accounting methods or
practices or made any material change in depreciation or amortization policies
or rates
22
adopted by it;
(vi) materially changed any of its business policies, including,
without limitation, advertising, investment, marketing, pricing, purchasing,
production, personnel, sales, returns, budget or product acquisition policies,
except as specifically set forth in the Company's Confidential Information
Memorandum (dated March 1995), a copy of which was previously delivered to
Metromedia;
(vii) made any loan or advance to any of its shareholders,
officers, directors, employees, consultants, agents or other representatives
(other than travel advances made in the ordinary course of business for business
travel and entertainment expenses), or made any other loan or advance otherwise
than in the ordinary course of business;
(viii) except for the acquisition or disposition of inventory, or
equipment or other Properties in the ordinary course of business, sold,
abandoned or made any other disposition of any of its Properties or made any
acquisition of all or any part of the Properties, capital stock or business of
any other person;
(ix) paid, directly or indirectly, any of its material
Liabilities before the same became due in accordance with its terms or otherwise
than in the ordinary course of business;
(x) terminated or failed to renew, or received any written threat
(that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the business of the
Company and the Subsidiaries taken as a whole;
(xi) except with respect to certain transactions among the
Company and its Subsidiaries as set forth on Schedule 3.24, amended its Articles
of Incorporation or By-laws (or comparable instruments) or merged with or into
or consolidated with any other Person, subdivided or in any way reclassified any
shares of its capital stock or changed or agreed to change in any manner the
rights of its outstanding capital stock or the character of its business; or
(xii) except for the Company's "first look" deal with Paramount
Pictures Corporation, the most recent copy of which and all material
correspondence
23
relating thereto has been provided to Metromedia, engaged in any other material
transaction.
3.25 Potential Conflicts of Interest. No executive officer or director
of the Company or any of the Subsidiaries, no Stockholder, no relative or spouse
(or relative of such spouse) of any such officer, director or Stockholder and no
entity controlled by one or more of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less
than 5% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any Person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, sales agent or customer of the Company or any of the
Subsidiaries except as set forth on Schedule 3.25(a);
(ii) except as set forth on Schedule 3.25(b), owns, directly or
indirectly, in whole or in part, any Property that the Company or any of the
Subsidiaries uses in the conduct of its business; or
(iii) except as set forth on Schedule 3.25(c), has any cause of
action or other claim whatsoever against, or owes any amount to, the Company or
any of the Subsidiaries, except for claims in the ordinary course of business
such as for accrued vacation pay, accrued benefits under employee benefit plans,
and similar matters and agreements existing on the date hereof.
3.26 Premerger Notification. The Company (or its ultimate parent
entity) will promptly file notification and report forms with respect to the
Contemplated Transactions in compliance with the HSR Act. Metromedia will bear
the costs of any filing fees required to be paid pursuant to the HSR Act as a
result of Metromedia being deemed an "acquiring person" under the HSR Act in
connection with the transactions contemplated in Section 1 hereof. In the event
Metromedia is not deemed an "acquiring person" under the HSR Act in connection
with the transactions contemplated by Section 1 hereof, the person deemed the
"acquiring person" shall bear the sole responsibility for any filing fee under
the HSR Act in connection with such transactions.
3.27 Projections. The projections relating to operations of the
Company and the Subsidiaries through the fiscal year ending 2003 (the
"Projections"), heretofore
24
delivered by the Company to Metromedia, have been prepared in good faith on a
reasonable basis. The assumptions on which the Projections are based are stated
in Schedule 3.27 and are consistent with past practices of the Company and the
Subsidiaries and with historical conditions applicable to the business of the
Company and the Subsidiaries. Nothing has come to the attention of the Company
or any of the Subsidiaries to indicate that the Projections or the assumptions
upon which they are based are not reasonable.
3.28 Full Disclosure. All documents, Contracts, instruments,
certificates, notices, consents, affidavits, letters, telegrams, telexes,
statements, schedules (including Schedules to this Agreement), exhibits
(including Exhibits to this Agreement), the Confidential Information Memorandum
dated March 1995 (the "Confidential Memorandum"), the Projections through the
year ending 2003, and any other papers whatsoever (collectively, "Documents")
delivered by or on behalf of the Stockholders, the Company or the Subsidiaries
in connection with this Agreement and the Contemplated Transactions are
authentic if original or true and correct copies of the originals. With the
exception of the Confidential Memorandum, no representation or warranty of the
Company or the Stockholders contained in this Agreement or in any of the
Schedules, and no Document furnished by or on behalf of the Stockholders, the
Company or the Subsidiaries to Metromedia pursuant to this Agreement or in
connection with the Contemplated Transactions, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements made, in the context in which made, not
materially false or misleading. Except as otherwise set forth in this Agreement,
there is no material fact that the Stockholders have not disclosed to Metromedia
in writing that materially adversely affects or, so far as any of the
Stockholders can now foresee, will have a Material Adverse Effect on the Company
or any of the Subsidiaries or the ability of the Stockholders to perform this
Agreement.
3.29 Environment Protection. Except as disclosed on Schedule 3.29:
(i) neither the Company nor any of its Subsidiaries is or has been in
violation in any material respect of any applicable Safety and Environmental Law
(as hereinafter defined);
25
(ii) the Company and its Subsidiaries have all material Permits
required pursuant to Safety and Environmental Laws, such Permits are in full
force and effect, no action or proceeding to revoke, limit or modify any of such
Permits is pending, and the Company and each of its Subsidiaries is in
compliance in all material respects with all terms and conditions thereof;
(iii) neither the Company nor any of its Subsidiaries has received any
Environmental Claim (as hereinafter defined);
For purposes of this Agreement, the following terms have the following
meanings:
(i) "Environmental Claims" means any notification, whether direct or
indirect, formal or informal, written or oral, pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the environment or health and safety, that any of the current or past
operations of the Company or any of its Subsidiaries, or any by-product thereof,
or any of the property currently or formerly owned, leased or operated by the
Company or any of its Subsidiaries, or the operations or property of any
predecessor of the Company or any of its Subsidiaries is or may be implicated in
or subject to any proceeding, action, investigation, claim, lawsuit, order,
agreement or evaluation by any Governmental Body or any other person.
(ii) "Safety and Environmental Laws" means all federal, state and
local laws and order relating to pollution, protection of the environment,
public or worker health and safety, or the emission, discharge, release or
threatened release of pollutants, contaminants or industrial, toxic or hazardous
substances or wastes into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or industrial, toxic or
hazardous substances or wastes, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. section 9601
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. section 6901 et
seq., the Toxic Substances Control Act, 15 U.S.C. section 2601 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. section 1251 et seq., the Clean
Air Act, 42 U.S.C. section 7401 et seq., the Federal
26
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. section 121 et seq., the
Occupational Safety and Health Act, 29 U.S.C. section 651 et seq., the Asbestos
Hazard Emergency Response Act, 15 U.S.C. section 2601 et seq., the Safe Drinking
Water Act, 42 U.S.C. section 300 et seq., the Oil Pollution Act of 1990 and
analogous state acts.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
4. Each Stockholder, severally and not jointly, represents and warrants to
Metromedia as follows:
4.1 Title to the Shares. As of the Closing Date, such Stockholder
shall own beneficially and of record, free and clear of any Lien, or shall own
of record and have full power and authority to convey free and clear of any
Lien, the Shares set forth opposite such Stockholder's name on Exhibit A, and,
upon delivery of and payment for such Shares as herein provided, such
Stockholder will convey to Metromedia good and valid title thereto, free and
clear of any Lien.
4.2 Authority to Execute and Perform Agreement. Such Stockholder has
the full legal right and power and all authority and approvals required to
execute and deliver this Agreement and to perform fully such Stockholder's
obligations hereunder. This Agreement has been duly executed and delivered by
such Stockholder and (assuming the due authorization, execution and delivery
hereof by MPCA Mergerco, the Company and Metromedia) is a valid and binding
obligation of such Stockholder enforceable in accordance with its terms except
as the same may be limited by (insolvency qualification). Except as set forth on
Schedule 4.2, the execution and delivery by such Stockholder of this Agreement,
the consummation of the Contemplated Transactions and the performance by such
Stockholder of this Agreement in accordance with its terms will not (i) require
the approval or consent of any Governmental Body or the approval or consent of
any other Person; (ii) conflict with or result in any breach or violation of any
of the terms and conditions of, or constitute (or with notice or lapse of time
or both constitute) a default under, any Law or Order of any Governmental Body
applicable to such Stockholder or to
27
the Shares held by such Stockholder, or any Contract to which such Stockholder
is a party or by or to which such Stockholder is or the Shares held by such
Stockholder are bound or subject; or (iii) result in the creation of any Lien on
the Shares held by such Stockholder.
4.3 Company's Representations and Warranties. To the Knowledge of the
Stockholders, the Company's representations and warranties set forth in Section
3 are true, correct and complete in all material respects.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF MPCA MERGERCO AND METROMEDIA
5. Metromedia and MPCA Mergerco represent and warrant to the Stockholders
and the Company as follows:
5.1 Due Incorporation and Authority. Each of the MPCA Mergerco and
Metromedia is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each has all requisite
corporate power and authority to own, lease and operate their respective
Properties and to carry on its business as now being and as heretofore
conducted.
5.2 Authority to Execute and Perform Agreement. Each of MPCA Mergerco
and Metromedia has the full legal right and power and all authority and
approvals required to execute and deliver this Agreement and to perform fully
their respective obligations hereunder. This Agreement has been duly executed
and delivered by each of MPCA Mergerco and Metromedia and (assuming the due
authorization, execution and delivery hereof by the Stockholders and the
Company) is a valid and binding obligation of each of MPCA Mergerco and
Metromedia enforceable in accordance with its terms.
5.3 No Violations. Except as set forth on Schedule 5.3, the execution
and delivery by MPCA Mergerco and Metromedia of this Agreement, the consummation
of the Contemplated Transactions and the performance by MPCA Mergerco and
Metromedia of this Agreement, in accordance with its terms will not (i) require
the consent, approval, action of, or making any filing with or giving notice to
any Governmental Body or any other
28
Person; (ii) conflict with or result in any breach or violation of any of the
terms and conditions of, or constitute (or with notice or lapse of time or both
constitute) a default under, the Certificate of Incorporation or By-laws of MPCA
Mergerco or Metromedia, any Law or Order of any Governmental Body applicable to
MPCA Mergerco or Metromedia, or any Contract to which MPCA Mergerco or
Metromedia is a party or by or to which MPCA Mergerco or Metromedia or any of
their Properties is bound or subject; or (iii) result in the creation of any
material Lien on any of the Properties of MPCA Mergerco, Metromedia or the
Surviving Corporation.
5.4 Investment Company Act. Metromedia either (i) is not an
"investment company", or to Metromedia's Knowledge a company "controlled" by, or
to Metromedia's Knowledge an "affiliated company" with respect to an "investment
company" required to register under the Investment Company Act of 1940, as
amended (the "Investment Company Act") or (ii) satisfied all conditions for an
exemption from the Investment Company Act, and accordingly, none of its
subsidiaries is required to be registered under the Investment Company Act.
5.5 Premerger Notification. Metromedia (or its ultimate Parent) will
promptly file notification and report forms with respect to the Contemplated
Transactions in compliance with the HSR Act.
5.6 Business of MPCA Mergerco. MPCA Mergerco has not incurred,
directly or indirectly through any subsidiary or otherwise, any liabilities or
obligations, except those incurred in connection with its incorporation or with
the negotiation and the execution, delivery and performance of this Agreement
and the transactions contemplated hereby. MPCA Mergerco has not engaged,
directly or indirectly through any subsidiaries or otherwise, in any business or
activities of any type or kind whatsoever, or entered into any agreement or
arrangements with any Person, and is not subject to or bound by any obligation
or understanding which is not contemplated by this Agreement.
5.7 Capitalization. The authorized capital stock of MPCA Mergerco
consists of 1000 shares of common stock, $.01 par value per share, all of which
are validly issued and outstanding, fully paid and nonassessable, and owned,
beneficially and of record,
29
by Metromedia, free and clear of all Liens. As of the date of this Agreement,
there are no outstanding options, warrants, preemptive or other rights,
contracts, commitments, or agreements by which MPCA Mergerco is or may become
obligated to issue any additional shares of its capital stock or securities
convertible into any such shares.
5.8 Reports and Financial Statements. Metromedia has previously
furnished or otherwise made available to the Company true and complete copies of
all reports on Forms 10-K, 10-Q and 8-K filed by Metromedia and Metromedia has
filed all reports on Forms 10-K, 10-Q and 8-K required to be filed by Metromedia
with the Securities and Exchange Commission since November 1, 1995. As of their
respective dates, such reports did not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading
5.9 Status of Metromedia Common Stock to be Issued. Assuming without
investigation that the shares of Company Common Stock at the Effective Time will
be validly authorized, validly issued, fully paid, and non-assessable, the
shares of Metromedia Common Stock to be issued in the Merger will, at the
Effective Time, be validly authorized and, when the Merger has become effective
and the shares of Metromedia Common Stock have been duly delivered pursuant to
the terms of this Agreement, such shares of Metromedia Common Stock will be
validly issued, fully paid and non-assessable.
ARTICLE 6
COVENANTS AND AGREEMENTS
6.1 Conduct of Business. From the date hereof through the Closing
Date, the Stockholders, jointly and severally, agree that they (i) shall cause
the Company and the Subsidiaries to conduct their businesses in the ordinary
course and, without the prior written consent of Metromedia, not to undertake
any of the actions specified in Section 3.24 unless otherwise disclosed in any
Schedule referred to in Section 3.24 or in connection with an item disclosed in
any such Schedule; and further not to (a)
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authorize for issuance, issue, grant, sell, pledge, dispose of or propose to
issue, grant, sell, pledge or dispose of any shares of, or any options,
warrants, commitments, subscriptions or rights of any kind to acquire any shares
of, the capital stock of the Company or any securities convertible into or
exchangeable for shares of stock of any class of the Company or any of its
Subsidiaries; (b) split, combine, subdivide or reclassify any shares of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem, purchase or otherwise acquire or offer to acquire any shares of its
own capital stock or any of its Subsidiaries or any other securities thereof or
any right, warrants or options to acquire any such shares or other securities;
(c) (1) except for debt (including obligations in respect of capital leases) not
in excess of $50,000 and except for the existing line of credit listed on
Schedule 6.1, create, incur or assume any short-term debt, long-term debt or
obligations in respect of capital leases; (2) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any other person except
wholly-owned subsidiaries of the Company, in the ordinary course of business
consistent with past practice; (3) make any capital expenditures or make any
loans, advances or capital contributions to, or investments in, any other Person
(other than customary travel or business or entertainment advances to employees,
representatives, consultants, directors or advisors or subsidiaries made in the
ordinary course of business consistent with past practice and/or in connection
with the consummation of the transactions contemplated by this Agreement and
listed on Schedule 6.1), currently committed, budgeted capital expenditures and
additional capital expenditures not in excess of $50,000; or (4) incur any
material liability or obligation (absolute, accrued, contingent or otherwise)
other than in the ordinary course of business and consistent with past practice;
(d) except in the ordinary course of business consistent with past practice or
as may be required by local law, sell, transfer, mortgage, or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage or otherwise dispose of or
encumber, any material assets or properties, real, personal or mixed; (e)
increase in any manner the compensation of any of
31
its officers; (f) enter into severance, termination or retention agreements, and
terminating any employment agreements, with its officers and key employees; (g)
(except in the ordinary course of business consistent with past practice) enter
into any agreement relating to the production, financing, acquisition,
development or license of motion pictures or television programming; (h) incur
any obligation in excess of $50,000 in connection with any item of Product to be
produced by the Company or its Subsidiaries; execute any Contract obligating the
Company or its Subsidiaries to pay a minimum guarantee of more than $50,000 for
any item of Product, incur acquisition costs of more than $100,000 for any item
of Product; (i) enter into any "first look" or output Contract with any Person;
and (ii) shall use reasonable commercial efforts to cause the Company and the
Subsidiaries to conduct their businesses in such a manner so that the
representations and warranties contained in Article 3 shall continue to be true
and correct on and as of the Closing Date as if made on and as of the Closing
Date. From the date hereof through the Closing Date, each Stockholder, severally
and not jointly, agrees to conduct such Stockholder's affairs in such a manner
so that the representations and warranties of such Stockholder contained in
Article 4 shall continue to be true and correct on and as of the Closing Date as
if made on and as of the Closing Date. The Stockholders shall give Metromedia
prompt notice of any event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute, to their Knowledge, a
violation or breach of any representation or warranty, whether made as of the
date hereof or as of the Closing Date, or that would constitute a violation or
breach of any covenant of any Stockholder contained in this Agreement.
6.2 Performance of Obligations; Copyright. From the date hereof
through the Closing Date, the Company and the Subsidiaries agree (i) to duly
observe and perform all material terms and conditions of all material agreements
with respect to the production, development and/or exploitation of each item of
Product and diligently protect and enforce the rights of the Company or any of
the Subsidiaries under all such agreements in a manner consistent with prudent
business practice; provided, however, that to the extent the Company does not
have adequate resources to comply with the foregoing, it shall
32
promptly inform Metromedia and Metromedia shall, in it sole discretion, decide
whether to pursue the same (if sufficient resources are not available, then
failure to comply shall not be deemed a breach of this covenant) and (ii) in
connection with each item of Product with respect to which the Company or any of
the Subsidiaries is or becomes the copyright proprietor thereof or to the extent
such interest is obtained by the Company or any of the Subsidiaries, or the
Company or any of the Subsidiaries otherwise acquires a copyrightable interest
in, take any and all actions reasonably necessary to register the copyright for
such item of Product in the name of the Company or any of the Subsidiaries in
conformity with the laws of the United States; provided, however, that to the
extent the Company does not have adequate resources to comply with the
foregoing, it shall promptly inform Metromedia and Metromedia shall, in it sole
discretion, decide whether to pursue the same (if sufficient resources are not
available, then failure to comply shall not be deemed a breach of this
covenant).
With respect to subsections (i) and (ii) of this Section 6.2 if
sufficient resources are not available to the Company and Metromedia does not
expend its resources in connection with the Company's rights under any
Production Services Agreement or under any item of Product after notification
thereof by Metromedia, such failure shall not be deemed a breach of this
covenant by either of the Company or Metromedia.
6.3 Corporate Examinations and Investigations. Prior to the Closing
Date, the Stockholders agree that Metromedia shall be entitled, through its
employees and representatives, including, without limitation, any counsel, tax
advisors and accountants, to conduct its due diligence investigation (the "Due
Diligence Investigation") and to make such investigation of the Properties,
businesses and operations of the Company and the Subsidiaries, and such
examination of the books, records and financial condition of the Company and the
Subsidiaries, as it wishes. Any such investigation and examination shall be
conducted at reasonable times and under reasonable circumstances, and the
Stockholders shall, and shall cause the Company and the Subsidiaries to,
cooperate fully therein. No investigation by Metromedia shall diminish or
obviate any of the representations, warranties, covenants or agreements of the
Stockholders contained in this Agreement except
33
as otherwise specifically set forth herein. In order that Metromedia may have
full opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may wish of the affairs of the Company and
the Subsidiaries, the Stockholders shall make available and shall cause the
Company and the Subsidiaries to make available to the representatives of
Metromedia during such period all such information and copies of such documents
concerning the affairs of the Company and the Subsidiaries as such
representatives may reasonably request, shall permit the representatives of
Metromedia access to the Properties of the Company and the Subsidiaries and all
parts thereof and shall cause their officers, employees, consultants, agents,
accountants and attorneys to cooperate fully with such representatives in
connection with such review and examination. If this Agreement terminates, (i)
Metromedia shall keep confidential and shall not use in any manner any
information or documents obtained from the Company or the Subsidiaries
concerning their Properties, businesses and operations, unless readily
ascertainable from public or published information, or trade sources, or already
known or subsequently developed by Metromedia independently of any investigation
of the Company or the Subsidiaries or through sources which, to the Knowledge of
Metromedia are not subject to an obligation of confidentiality otherwise
required by law to be disclosed provided, however, that if required by law to be
disclosed, Metromedia shall give the Company and the Stockholders written notice
of such disclosure and a reasonable opportunity to obtain a protective order,
and (ii) any documents obtained from the Company or the Subsidiaries and all
copies thereof shall be returned.
6.4 Publicity. Except as may be required by the rules and regulations
of the SEC or the American Stock Exchange, the parties agree that no publicity
release or announcement concerning this Agreement or the Contemplated
Transactions shall be made without advance approval thereof by the other party
hereto.
6.5 Expenses. The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the Contemplated Transactions, including, without limitation, all fees and
expenses of agents, representatives,
34
counsel and accountants.
6.6 Indemnification of Brokerage. The Stockholders, jointly and
severally, represent and warrant to Metromedia that there are no brokerage
commissions, finder's fees or similar fees or commissions payable to any Person
(a "Broker") in connection with this Agreement or based on any agreement,
arrangement or understanding with the Company, any of the Subsidiaries or any of
the Stockholders, or any action taken by the Company, any of the Subsidiaries or
any of the Stockholders relating thereto. The Stockholders agree, jointly and
severally, to indemnify and save Metromedia harmless from any claim or demand
for commission or other compensation by any Broker claiming to have been
employed by or on behalf of the Company, any of the Subsidiaries or any of the
Stockholders, and to bear the cost of legal expenses incurred in defending
against any such claim. Metromedia represents and warrants to the Stockholders
that no Broker has acted on behalf of Metromedia in connection with this
Agreement or the Contemplated Transactions, and that there are no brokerage
commissions, finders' fees or similar fees or commissions payable in connection
therewith based on any agreement, arrangement or understanding with Metromedia,
or any action taken by Metromedia. Metromedia agrees to indemnify and save the
Stockholders harmless from any claim or demand for commission or other
compensation by any Broker claiming to have been employed by or on behalf of
Metromedia, and to bear the cost of legal expenses incurred in defending against
any such claim.
6.7 Related Parties. The Stockholders shall, simultaneously with the
Closing, pay or cause to be paid to the Company or one of the Subsidiaries, as
the case may be, all amounts owed to the Company or such Subsidiary and
reflected on the Balance Sheet or borrowed from or owed to the Company or such
Subsidiary since the Balance Sheet Date by any of the Stockholders or any
Affiliate of any of the Stockholders. At and as of the Closing, upon delivery of
the consideration pursuant to Section 2.3, there will be no further obligation
of the Company to the Stockholders with respect to the Existing Note Amount. The
Company shall remain liable to the Stockholders for compensation, reimbursement
of expenses, and obligations under contracts, all listed on Schedule 6.7.
35
6.8 Further Assurances. Each of the parties shall execute such
Documents and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the Contemplated Transactions.
Each such party shall use its best commercially reasonable efforts to fulfill or
obtain the fulfillment of the conditions to the Closing set forth in Articles 7
and 8.
6.9 D&O Insurance. Metromedia agrees to maintain insurance relating to
directors' and officers' liability and cause the Surviving Corporation to act in
accordance with the indemnification provisions of the Surviving Corporation's
by-laws and certificate of incorporation.
6.10 Employee Benefits; Employment Contracts; Indemnification.
(a) Following the Effective Time, the Surviving Corporation will
provide generally to officers and employees of the Company employee benefits,
which in the aggregate, are no less favorable than those provided by Orion
Pictures Corporation, a wholly-owned subsidiary of Metromedia. However, the
Surviving Corporation shall have the right to amend, modify, or terminate any
employee benefit plan, program, or arrangement after the Effective Time, in
accordance with the terms and conditions of such plans, programs or
arrangements.
(b) The Surviving Corporation will honor all Company employment
agreements listed on Schedule 6.10 in accordance with the terms and conditions
of such agreement.
6.11 Capital Stock Changes. If, prior to the Effective Time,
Metromedia shall effect any stock dividend, stock split, or reverse stock split
of Metromedia Common Stock, then the shares of Metromedia Common Stock, to be
delivered under this Agreement shall be appropriately and equitably adjusted to
the kind and amount of shares of stock and other securities and property to
which the holders of such shares of Metromedia Common Stock would have been
entitled to receive had such stock or such other security been issued and
outstanding as of the record date for determining stockholders entitled to
participate in such corporate event.
6.12 Company Trademarks. Upon expiration or earlier termination of
36
the Employment Agreements referred to in Section 7.7 (if expired or terminated
separately, upon the expiration or termination of the latter Employment
Agreement), the Surviving Corporation agrees to assign to the Stockholders,
jointly, all of the Surviving Corporation's right, title and interest in and to
the trade name and the trademark MOTION PICTURE CORPORATION OF AMERICA and the
design of the xxxx as reproduced on Exhibit A hereto (collectively, the Xxxx),
provided, however, that Metromedia and its Affiliates shall have the
irrevocable, perpetual, royalty-free right to continue to use the Xxxx
throughout the universe on any Company Product (as such term is defined in the
Employment Agreements) existing prior to the expiration or earlier termination
of the Employment Agreements. The parties agree to execute any and all
instruments necessary to effectuate the assignment referred to herein. The
Surviving Corporation agrees that from the Effective Time until the assignment
to the Stockholders as set forth above, it will not assign, transfer, dispose
of, or license the Xxxx or any part thereof to any Person except that the Xxxx
xxx be transferred to and used by Affiliates on a non-exclusive basis with the
approval of the Stockholders which shall not be unreasonably withheld or
delayed.
6.13 Restricted Stock Plan. Metromedia will adopt a Restricted Stock
Plan in the form of Exhibit B hereto and grant the Awards (as defined therein)
on the Adjustment Date. Metromedia will use reasonable efforts to register the
Common Stock underlying the Awards on a Form S-8.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION
METROMEDIA TO CLOSE
7. The obligations of Metromedia to enter into and complete the
Closing are subject, at the option of Metromedia acting in accordance with the
provisions of Section 11 with respect to termination of this Agreement, to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be waived by it:
7.1 Representations and Covenants. The representations and warranties
37
of the Company and the Stockholders contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Company and
each of the Stockholders shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by the Company or such Stockholder, as the case may
be, on or prior to the Closing Date. The Company and each Stockholder shall have
delivered to Metromedia a certificate, dated the date of the Closing and signed
by the Company or such Stockholder, to the foregoing effect.
7.2 Consents and Approvals. All Required Consents shall have been
obtained and be in full force and effect, and Metromedia shall have been
furnished with evidence reasonably satisfactory to it of the granting of such
approvals, authorizations and consents.
7.3 Opinion of Counsel to the Stockholders. Metromedia shall have
received the opinion of Loeb & Loeb, LLP, counsel to the Company and the
Stockholders, dated the date of the Closing, addressed to Metromedia, in the
form of Exhibit C.
7.4 Intentionally Omitted.
7.5 FIRPTA Affidavit. Metromedia shall have received an affidavit of
each Stockholder sworn to under penalty of perjury, setting forth such Majority
Stockholder's name, address and Federal tax identification number and stating
that Stockholder is not a "foreign person" within the meaning of Section 1445 of
the Internal Revenue Code of 1986 (the "Code").
7.6 HSR Act Filing. Any Person required in connection with the
Contemplated Transactions to file a notification and report form in compliance
with the HSR Act shall have filed such form and the applicable waiting period
with respect to each such form (including any extension thereof by reason of a
request for additional information) shall have expired or been terminated.
7.7 Employment Agreements. Each Stockholder shall have entered into an
Employment Agreement in the form attached to that certain letter dated as of the
date hereof from the Surviving Corporation to the Stockholders.
38
7.8 No Claims. There shall be no outstanding Order of any Governmental
Body against or involving the Company or any of the Subsidiaries and there are
no claims pending, or to the Knowledge of the Company, any of the Subsidiaries
or any of the Stockholders, threatened against or involving the Company or any
of the Subsidiaries or any of their Properties which individually or in the
aggregate could have a Material Adverse Effect or an adverse effect on the
Contemplated Transactions.
7.9 Board Approval. The Board of Directors of Metromedia shall have
approved this Agreement and the Contemplated Transactions.
7.10 Due Diligence. Metromedia shall have completed its legal,
financial and accounting review of the Company and the subsidiaries and shall be
satisfied with the results of such review.
7.11 No Dissenters' Rights. No holder of any Shares of Company Common
Stock shall have objected to the Merger in writing and demanded the value of
their shares pursuant to Section 262 of the Delaware General Corporation Law.
7.12 Paramount Pictures. The Agreement dated as of November 1, 1995
between Paramount Pictures Corporation and the Company shall be executed in a
form approved by Metromedia.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE STOCKHOLDERS TO CLOSE
The obligation of the Stockholders to enter into and complete the Closing
is subject, at the option of the Stockholders acting in accordance with the
provisions of Section 11 with respect to termination of this Agreement, to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be waived by them:
8.1 Representations and Covenants. The representations and warranties
of Metromedia contained in this Agreement shall be true on and as of the Closing
Date with
39
the same force and effect as though made on and as of the Closing Date.
Metromedia shall have performed and complied with all covenants and agreements
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date. Metromedia shall have delivered to the Stockholders a
certificate, dated the date of the Closing and signed by an officer of
Metromedia, to the foregoing effect.
8.2 Consents and Approvals. All Required Consents shall have been
obtained and be in full force and effect and the Company and the Stockholders
shall have been furnished with evidence reasonably satisfactory to each of them
of the granting of such approvals, authorizations and consents.
8.3 Opinion of Counsel to Metromedia. The Stockholders shall have
received the opinion of Xxxxxx X. Xxxxxx, General Counsel to Metromedia, dated
the date of the Closing, addressed to the Stockholders, in the form of Exhibit
F.
8.4 HSR Act Filing. Any Person required in connection with the
Contemplated Transactions to file a notification and report form in compliance
with the HSR Act shall have filed such form and the applicable waiting period
with respect to each such form (including any extension thereof by reason of a
request for additional information) shall have expired or been terminated.
8.5 Employment Agreements. The Surviving Corporation shall have
entered into employment agreements with each of the Stockholders in the form
attached to that certain letter dated as of the date hereof from the Surviving
Corporation to the Stockholders.
8.6 No Claims. There shall be no outstanding Order of any governmental
body against or involving Metromedia and there shall be no claims pending or to
the Knowledge of Metromedia, threatened against or involving Metromedia which
could have an adverse effect on the Contemplated Transactions.
8.7 Board Approval. The Board of Directors of the Company shall have
approved this Agreement and the Contemplated Transactions.
8.8 Due Diligence. The Company and the Stockholders shall have
completed their review of Metromedia and shall be satisfied with the results of
such review.
40
8.9 The parties shall enter into a Registration Rights Agreement in
the form of Exhibit G hereto.
8.10 No Dissenters' Rights. No holder of any Shares of Company Common
Stock shall have objected to the Merger in writing and demanded the value of
their shares pursuant to Section 262 of the Delaware General Corporation Law.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AFTER CLOSING
Notwithstanding any right of Metromedia fully to investigate the affairs of
the Company and the Subsidiaries and notwithstanding any Knowledge of facts
determined or determinable by Metromedia pursuant to such investigation or right
of investigation, Metromedia has the right to rely fully upon the
representations, warranties, covenants and agreements of the Stockholders
contained in this Agreement or in any Documents delivered pursuant to this
Agreement. All such representations, warranties, covenants and agreements shall
survive the execution and delivery of this Agreement and the Closing hereunder.
Except for all representations and warranties in Article 4, all representations
and warranties of the Stockholders contained in this Agreement shall terminate
and expire (i) on the date 3 years after the Closing Date, with respect to any
General Claim (as defined below) based upon, arising out of or otherwise in
respect of any fact, circumstance, action or proceeding of which Metromedia
shall not have given notice on or prior to such date to the Stockholders, and
(ii) with respect to any Tax Claim ), on the later of (a) the date upon which
the liability to which any such Tax Claim may relate is barred by all applicable
statutes of limitation or (b) the date upon which any claim for refund or credit
related to such Tax Claim is barred by all applicable statutes of limitations.
As used in this Agreement, the following terms have the following meanings:
(x) "General Claim" means any claim based upon, arising out of or
otherwise in respect of any inaccuracy in or any breach of any representation or
warranty, of
41
any Stockholder contained in this Agreement or in any Documents delivered
pursuant to this Agreement.
(y) "Tax Claim" shall mean any claim based upon, arising out of
or otherwise in respect of any inaccuracy or any breach of any representation or
warranty contained in Section 3.9.
ARTICLE 10
GENERAL INDEMNIFICATION
10.1 Obligation of the Stockholders to Indemnify.
(a) Subject to the limitations contained in Article 9 and this Article 10,
the Stockholders jointly and severally agree to indemnify, defend and hold
harmless Metromedia (and their respective directors, officers, employees,
Affiliates, parents, partners, shareholders, successors and assigns) from and
against all losses, liabilities, damages, deficiencies, demands, claims,
actions, judgments or causes of action, assessments, costs or expenses
(including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements) ("Losses") based upon, arising out of or otherwise in
respect of any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of the Company or the Stockholders contained in this
Agreement with the exception of Article 4.
(ii) Each Stockholder agrees to indemnify, defend and hold
harmless Metromedia (and its respective directors, employees, officers,
Affiliates, parents, partners, shareholders, successors and assigns) from and
against all Losses based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of such Stockholder contained in this Agreement.
10.2 Obligation of Metromedia to Indemnify. Metromedia agrees to
indemnify, defend and hold harmless the Stockholders from and against all Losses
based upon, arising out of or otherwise in respect of any inaccuracy in or any
breach of any
42
representation, warranty, covenant or agreement of Metromedia contained in this
Agreement.
10.3 Notice and Opportunity to Defend.
10.3.1 Notice of Asserted Liability.
Promptly after receipt by any party hereto (the "Indemnitee") of notice of any
demand, claim or circumstances which, with the lapse of time, would or might
give rise to a claim or the commencement (or threatened commencement) of any
action, proceeding or investigation (an "Asserted Liability") that may result in
a Loss, the Indemnitee shall give notice thereof (the "Claims Notice") to any
other party (or parties) obligated to provide indemnification pursuant to
Section 10.1 or 10.2 (the "Indemnifying Party"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate the
amount (estimated, if necessary and to the extent feasible) of the Loss that has
been or may be suffered by the Indemnitee.
10.3.2 Opportunity to Defend. Except as otherwise set forth in
Section 10.3.3, the Indemnifying Party may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 20
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the compromise of, or defense against,
such Asserted Liability. If the Indemnifying Party elects not to compromise or
defend the Asserted Liability, fails to notify the Indemnitee of its election as
herein provided or contests its obligation to indemnify under this Agreement,
the Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the objection of the other; provided,
however, that consent to settlement or compromise shall not be unreasonably
withheld or delayed. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability.
Notwithstanding the foregoing, any Indemnitee shall be entitled to employ
separate counsel from the Indemnifying Party if the interests of such Indemnitee
43
may be prejudiced without such separate counsel (including, without limitation,
if one or more legal defenses may be inconsistent or in conflict with the legal
defenses available to the Indemnifying Party) and the Indemnifying Party shall
entirely and solely bear the reasonable fees and expenses of such separate
counsel. If the Indemnifying Party chooses to defend any claim, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
10.3.3 Opportunity to Defend Tax Deficiencies. In the event a
claim (a "Tax Deficiency") (including a revenue agent's report or notice of
proposed adjustment) shall be made by the Internal Revenue Service or its state,
local or foreign counterpart, which, if successful, would result in an
obligation on the part of the Stockholders to indemnify Metromedia for Taxes,
Metromedia shall give prompt written notice thereof to Stockholders. If, within
thirty days after the giving of such notice, the Stockholders notify Metromedia
in writing that they wish to question a Tax Deficiency in administrative
proceedings before the Internal Revenue Service or its state, local or foreign
counterpart, then, subject to the following provisions, Metromedia shall afford
to the Stockholders an opportunity in good faith (and subject to the
satisfaction of Metromedia's reasonable requirements) to participate in such
administrative proceeding as to such Tax Deficiency, provided, however, that in
the case of a Tax Deficiency which will, as a result of any adjustment of tax
basis of assets of the Company and the Subsidiaries or their respective
predecessors or Affiliates or the adjustment, restatement or recharacterization
of amounts deducted by the Company and the Subsidiaries or their respective
predecessors or Affiliates, require the Company and the Subsidiaries to
recognize additional taxable income for any Tax Period following the Effective
Time, Metromedia shall not be obligated to afford the Stockholders an
opportunity to participate in such administrative proceeding as to such Tax
Deficiency unless and until the Stockholders shall have delivered to Metromedia
a current opinion of counsel reasonably acceptable to Metromedia to the effect
that Stockholders' position with respect to the Tax Deficiency is more likely
than not to prevail. Metromedia shall not be obligated to take a protest with
respect to a Tax Deficiency to the
44
appellate levels within the Internal Revenue Service or its state, local or
foreign counterpart, or to commence litigation in the Tax Court or any other
court unless and until the Stockholders shall have (a) delivered to Metromedia a
current opinion of counsel reasonably acceptable to Metromedia to the effect
that the Stockholders' position with respect to the Tax Deficiency is more
likely than not to prevail, and (b) delivered to Metromedia a certified check
drawn to Metromedia in the amount of the Tax Deficiency where payment of the Tax
Deficiency is required to commence appellate proceedings or litigation. If the
Stockholders fail to satisfy the requirements of the preceding sentences,
Metromedia may settle the Tax Deficiency covered by the notice for an amount
that does not exceed the amount of Taxes set forth in the original notice to the
Stockholders. If Metromedia desires to settle any Tax Deficiency, it shall give
the Stockholders thirty days' prior written notice of such intention setting
forth the terms of such settlement. Metromedia shall be entitled to settle any
Tax Deficiency covered by such notice after the expiration of said thirty day
period unless in the case of a Tax Deficiency which will, as a result of any
adjustment of Tax basis of assets of the Company and the Subsidiaries or their
respective predecessors or Affiliates or the adjustment, restatement or
recharacterization of amounts deducted by the Company and the Subsidiaries or
their respective predecessors or Affiliates, require the Company and the
Subsidiaries to recognize additional taxable income for any Tax period following
the Effective Time the Stockholders deliver to Metromedia a current opinion of
counsel reasonably acceptable to Metromedia to the effect that the Stockholders'
position with respect to the Tax Deficiency is more likely than not to prevail.
If the Stockholders shall deliver such an opinion, the Stockholders shall be
entitled to settle such Tax Deficiency without the written consent of Metromedia
unless entering into such a settlement, would, in the reasonable judgment of
Metromedia, have an adverse effect on the business of the Company or the
Subsidiaries.
10.4 Limitation on Claims. In case any event shall occur which would
otherwise entitle Metromedia to assert a claim for indemnification hereunder, no
Loss shall be deemed to have been sustained by such party to the extent of (a)
any tax savings realized by such party with respect thereto in the year in which
the indemnification would otherwise
45
be made in connection with the claim or (b) any proceeds received by such party
from any insurance policies with respect thereto.
10.5 Maximum Exposure. Notwithstanding anything to the contrary in
Section 10.1(a), (a) Metromedia shall be entitled to indemnification hereunder
only when, and only with respect to amounts by which, the aggregate of all
Losses sustained by it exceeds $500,000 and (b) the aggregate amount of all
Losses subject to indemnification hereunder by the Stockholders shall not exceed
$27,500,000.
10.6 Actual Knowledge. An Indemnifying Party shall not be liable under
this Article X for a Loss resulting from any event relating to a breach of any
representation, warranty, covenant or agreement if the Indemnifying Party can
establish that the Indemnitee had Knowledge on or before the Closing Date of
such event.
10.7 Option to Pay Indemnity Obligations in Stock. In the event that
any payment of the indemnity obligations of the Stockholders set forth in
Section 10.1 is required to be made, the Stockholders may satisfy such payment,
in whole or in part, by delivering to Metromedia shares of Metromedia Common
Stock acquired by them pursuant to the merger pursuant to this Agreement, which
shares, for such purpose, shall be valued at the closing price of Metromedia
Common Stock, as reported in The Wall Street Journal, on the date such liability
is finally determined. The Stockholders may satisfy the indemnification
obligations set forth in Section 10.1 by cash, stock, or a combination thereof.
ARTICLE 11
TERMINATION OF AGREEMENT
11.1 Termination. This Agreement may be terminated prior to the
Closing as follows:
(i) at the election of the Stockholders, if any one or more of
the conditions to the obligation of the Stockholders to close has not been
fulfilled as of the scheduled Closing Date;
46
(ii) at the election of Metromedia, if any one or more of the
conditions to its respective obligations to close has not been fulfilled as of
the scheduled Closing Date; (iii) at the election of the Stockholders, if
Metromedia has breached any material representation, warranty, covenant or
agreement contained in this Agreement, which breach cannot be or is not cured by
the Closing Date; (iv) at the election of Metromedia, if any of the Stockholders
has breached any material representation, warranty, covenant or agreement
contained in this Agreement, which breach cannot be or is not cured by the
Closing Date; or (v) at the election of Metromedia if Metromedia is not
satisfied with the results of its Due Diligence Investigation; (vi) at the
election of the Stockholders if there is a Material Adverse Change in the
business operations or prospects of Metromedia at any time on or prior to the
Closing Date; (vii) at the election of Metromedia, if there is a Material
Adverse Change in the business operations or prospects of the Company at any
time on or prior to the Closing Date; or (viii) by mutual written consent of the
Stockholders and Metromedia.
If this Agreement so terminates, it shall become null and void and have no
further force or effect, except as provided in Section 11.2.
11.2 Survival After Termination. If this Agreement is terminated in
accordance with Section 11.1 and the Contemplated Transactions are not
consummated, this Agreement shall become void and of no further force and
effect, except for (i) the provisions of Section 6.2 relating to the obligation
of Metromedia to keep confidential and not to use certain information and data
obtained by it from the Company or the Subsidiaries and to return documents to
the Company or the Subsidiaries, and (ii) the provisions of Sections 6.4, 6.5
and 12.2; provided, however, that none of the parties shall have any liability
in respect of a termination of this Agreement except to the extent that failure
to
47
satisfy the conditions of Article 7 or Article 8, as the case may be, results
from the intentional or willful violation of such party contained in this
Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Certain Definitions. (a) As used in this Agreement, the following
terms have the following meanings:
(i) "Active Preproduction" means, with respect to any item of
Product as commencing upon the earlier of (i)eight weeks prior to the scheduled
date on which principal photography with respect to such item of Product is to
commence or (ii) the date that such item of Product has been "greenlighted" as
such term is understood in the motion picture industry.
(ii) "Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under common control with, or the parents,
spouse, lineal descendants or beneficiaries of, such Person.
(iii) "Budgeted Negative Cost" means, with respect to any item of
Product, the amount of the cash budget for such item of Product including all
costs customarily included in connection with the acquisition of all underlying
literary and musical rights with respect to such item of Product and in
connection with the preparation, production and completion of such item of
Product including costs of materials, equipment, physical properties, personnel
and services utilized in connection with such item of Product, both
"above-the-line" and "below-the-line", any completion guaranty fee, and all
other items customarily included in negative costs, but excluding contingency of
up to 10%, production fees and overhead charges payable to the Company or its
Subsidiaries, finance charges and interest expense.
(iv) "Contingent Compensation" means compensation that is
contingent upon and payable only (a) to the extent of the receipt of revenues
from the exploitation of a particular motion picture, video, television or
interactive program or (b) upon the passage of time or the occurrence of an
identified event. Examples of such
48
contingent compensation include, but are not limited to, deferred cash payments
for rights or services, or gross or net profit or proceed participations.
(v) "Distribution Contract" shall mean any agreement entered into
by the Company or any of its Subsidiaries pursuant to which the Company or any
of its Subsidiaries has licensed, leased, assigned or sold distribution or other
exploitation rights to any item of Product in any media or territory.
(vi) "Knowledge" with respect to the Company or any of the
Subsidiaries means the actual Knowledge, after due inquiry, of any of the
following officers or directors of the Company or any of the Subsidiaries:
Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxx and Xxxxxxx Xxxxx and "Knows" has a correlative
meaning.
(vii) "Person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
(viii) "Product" shall mean any motion picture, film or video
tape produced for theatrical, non-theatrical, television or video release or for
release in any other medium, in each case whether recorded on film, videotape,
cassette, cartridge, disc or on or by any other means, method, process or device
whether now known or hereafter developed, with respect to which the Company or
its Subsidiaries (i) is the initial copyright owner or (ii) has acquired or has
contracted to acquire an equity interest or distribution rights. The term "item
of Product" shall include, without limitation, the scenario, screenplay or
script upon which such Product is based, all of the properties thereof, tangible
and intangible, and whether now in existence or hereafter to be made or
produced, whether or not in possession of the Company or its Subsidiaries, and
all rights therein and thereto, of every kind and character.
(ix) "Property" or "Properties" means real, personal or mixed
Property, tangible or intangible.
(b) The following capitalized terms are defined in the following
Sections of this Agreement:
49
Term Section
---- -------
Asserted Liability 10.3.1
Audited Financials 3.7
Balance Sheet 3.7
Balance Sheet Date 3.7
Buyer Preamble
Claims 3.13
Claims Notice 10.3.1
Closing 1.2
Closing Date 1.2
Company Preamble
Contemplated Transactions 3.12
Contracts 3.12
Documents 3.28
General Claim 9(x)
Governmental Body 3.10
HSR Act 3.26
Indemnifying Party 10.3.1
Indemnitee 10.3.1
Interim Financials 3.7
Laws 3.10
Liabilities 3.19
Liens 3.4
Losses 10.1
Material Adverse Effect 3.8
Orders 3.10
Permits 3.11
Projections 3.27
50
Purchase Price 1.1
Required Consents 3.12
Stockholder Preamble
Shares Preamble
Subsidiaries 3.2
Tax Claim 9(y)
Taxes 3.9
12.2 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement or the
Contemplated Transactions may be instituted in any federal court of the Southern
District of New York or any state court located in New York County, State of New
York, and each party agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court. Each party further irrevocably
submits to the jurisdiction of such court in any such action, suit or
proceeding. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against any party if given
personally or by registered or certified mail, return receipt requested, or by
any other means of mail that requires a signed receipt, postage prepaid, mailed
to such party as herein provided. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any manner permitted by law or
to commence legal proceedings or otherwise proceed against any other party in
any other jurisdiction.
12.3 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission (receipt confirmed) or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, or sent by facsimile transmission or, if mailed, five days
after the date of deposit in the United States mails, as follows:
51
(i) if to Metromedia:
Metromedia International Group, Inc.
c/o Metromedia Company
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
Facsimile: 000-000-0000
(ii) if to the Company or the Stockholders, to:
Motion Picture Corporation of America
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx and Xxxxxx Xxxxxxx
Facsimile: 000-000-0000
with a copy to:
Loeb & Loeb, LLP.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: 000-000-0000
Any party may by notice given in accordance with this Section to the other
parties designate another address or Person for receipt of notices hereunder.
12.4 Entire Agreement. This Agreement (including the Exhibits and
Schedules) and any collateral agreements executed in connection with the
consummation of the Contemplated Transactions contain the entire agreement among
the parties with respect to the purchase of the Shares and supersede all prior
agreements, written or oral, with respect thereto.
12.5 Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, cancelled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by Metromedia and the Stockholders or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of
52
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The rights and remedies
herein provided are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any inaccuracy in or breach of
any representation, warranty, covenant or agreement contained in this Agreement
or any Documents delivered pursuant to this Agreement shall in no way be limited
by the fact that the act, omission, occurrence or other state of facts upon
which any claim of any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty, covenant or agreement
contained in this Agreement or any Documents delivered pursuant to this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.
12.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.
12.7 Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement is not assignable except by operation of
law, except that Metromedia may assign its rights hereunder to any of its
Affiliates.
12.8 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
12.9 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
12.10 Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to Sections,
Exhibits and
53
Schedules shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require.
12.11 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
12.12 Interpretation. The parties acknowledge and agree that: (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto,
regardless of which party was generally responsible for the preparation of this
Agreement.
12.13 Severability of Provisions. If any provision or any portion of
any provision of this Agreement, or the application of any such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to Persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby.
54
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
METROMEDIA INTERNATIONAL GROUP, INC.
By ------------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Vice President
MOTION PICTURE CORPORATION OF AMERICA
By ------------------------------
Name: Xxxxxxx Xxxxxx
Title:
------------------------------
STOCKHOLDERS:
------------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
MPCA MERGER CORP.
By: ------------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Vice President
55
